As filed with the U.S. Securities and Exchange Commission on February 8, 2023.
Registration No. 333-268782
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
AMENDMENT NO. 2
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
GRINDR INC.
(Exact name of registrant as specified
in its charter)
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Delaware
(State or other jurisdiction of
incorporation or organization)
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7370
(Primary Standard Industrial
Classification Code Number)
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92-1079067
(I.R.S. Employer
Identification No.)
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750 N. San Vicente Blvd., Suite RE 1400
West Hollywood, CA 90069
(310) 776-6680
George Arison
Chief Executive Officer
750 N. San Vicente Blvd., Suite RE 1400
West Hollywood, CA 90069
(310) 776-6680
Copies to:
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William Shafton
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David Peinsipp
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VP, Business & Legal Affairs and Secretary
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Kristin VanderPas
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Grindr Inc.
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Cooley LLP
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750 N. San Vicente Blvd., Suite RE 1400
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3 Embarcadero Center, 20th Floor
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West Hollywood, CA 90069
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San Francisco, CA 94111
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(310) 776-6680
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(415) 693-2000
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Approximate date of commencement of proposed sale to
the public:
From time to time on or after this registration statement is declared
effective.
If any of the securities being registered on this Form are to be
offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box. ☒
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(c) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
If this Form is a post-effective amendment filed pursuant to Rule
462(d) under the Securities Act, check the following box and list the Securities Act registration statement number of the earlier effective registration statement for the same offering. ☐
Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in
Rule 12b-2 of the Exchange Act.
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Large accelerated filer
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Accelerated filer
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Non-accelerated filer
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Smaller reporting company
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☒
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Emerging growth company
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☒
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If an emerging growth company, indicate by check mark if the
registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 7(a)(2)(B) of the Securities Act. ☐
The registrant hereby amends this registration
statement on such date or dates as may be necessary to delay its effective date until the registrant shall file a further amendment which specifically states that this registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement shall become effective on such date as the Securities and Exchange Commission, acting pursuant to said Section 8(a), may determine.
The information in this preliminary prospectus is not complete and may be changed. Neither we nor the selling security holders
may sell these securities until the registration statement filed with the Securities and Exchange Commission is effective. This preliminary prospectus is not an offer to sell these securities nor does it seek an offer to buy these securities
in any jurisdiction where the offer or sale is not permitted.
Subject to Completion, Dated February 8, 2023
PRELIMINARY PROSPECTUS
Up to 37,360,000 Shares of Common Stock Issuable Upon Exercise of Warrants
Up to 174,971,961 Shares of Common Stock
and
Up to 23,560,000 Warrants to Purchase Common Stock
This prospectus relates to the issuance by us of an aggregate of
up to 37,360,000 shares of our common stock, $0.0001 par value per share (the “Common Stock”), issuable upon the exercise of warrants, which consists of (i) up to 18,560,000 shares of Common Stock that are
issuable upon the exercise of 18,560,000 warrants (the “Private Placement Warrants”) originally issued in private placements to Tiga Sponsor LLC, a Delaware limited liability company (the “Sponsor”), the initial stockholder of Tiga Acquisition Corp. (“Tiga”), (ii) up to 13,800,000 shares of Common Stock that are issuable upon the exercise of 13,800,000
warrants (the “Public Warrants”) originally issued in the initial public offering of Tiga, and (iii) up to 5,000,000 shares of Common Stock that are issuable upon the exercise of 5,000,000 warrants
originally issued to certain equityholders of Legacy Grindr (as defined herein) (the “FPA Warrants”). We will receive the proceeds from any exercise of any Warrants for cash.
This prospectus also relates to the offer and sale, from time to
time, by the selling securityholders named in this prospectus or their permitted transferees (the “selling securityholders”) of (i) up to 174,971,961 shares of Common Stock consisting of (a) up to 6,900,000
shares of Common Stock held by the founders and independent directors of Tiga and certain of its affiliates (the “Founder Shares”), (b) up to 18,560,000 shares of Common Stock issuable upon exercise of the
Private Placement Warrants, (c) up to 144,214,804 shares of Common Stock owned by certain equityholders of Legacy Grindr, (d) up to 5,000,000 shares of Common Stock that are issuable upon the exercise of the FPA Warrants, and (e) up to 297,157
shares of Common Stock acquirable upon the exercise of certain options and (ii) up to 23,560,000 Warrants consisting of (a) up to 18,560,000 Private Placement Warrants and (b) up to 5,000,000 FPA Warrants. We will not receive any proceeds from
the sale of shares of Common Stock or Warrants by the selling securityholders pursuant to this prospectus.
Certain of the selling securityholders acquired securities at
prices that are significantly less than the current trading price of our Common Stock. The founders of Tiga paid approximately $0.0036 per share for each share of Common Stock and $1.00 per private placement warrant for each private placement
warrant being offered pursuant to this prospectus.
The Common Stock being offered for resale pursuant to this
prospectus by the selling securityholders would represent approximately 83.0% of our outstanding Common Stock as of January 6, 2023 (after giving effect to the issuance of the shares issuable upon exercise of the Warrants held by the selling
securityholders and the acquisition of certain shares acquirable upon the exercise of certain options). Our two largest stockholders, G. Raymond Zage, III and James Fu Bin Lu, who beneficially own approximately 72.8% of our issued and outstanding
Common Stock in the aggregate, will be able to sell all of his securities held for so long as the registration statement of which this prospectus forms a part is in effect, subject to any applicable lock-up restrictions. Given the substantial
number of shares of Common Stock being registered for potential resale by selling securityholders pursuant to this prospectus, the sale of shares by the selling securityholders of a large number of shares, or the perception in the market that the
selling securityholders of a large number of shares intend to sell shares, could increase the volatility of the market price of our Common Stock or result in a significant decline in the public trading price of our Common Stock. Even if our
trading price is significantly below $10.00, the offering price for the units offered in the initial public offering of Tiga, the purchasers of which exchanged their Tiga shares for our Common Stock in the business combination described in this
prospectus, the selling securityholders may still have an incentive to sell our shares of our Common Stock because they purchased the shares at prices that are significantly lower than the purchase prices paid by our public investors or the
current trading price of our Common Stock. While certain of the selling securityholders may experience a positive rate of return on their investment in our Common Stock as a result, the public securityholders may not experience a similar rate of
return on the securities they purchased due to differences in their purchase prices and the trading price. For example, based on the closing price of our Common Stock of $5.20 as of January 6, 2023, the founders would experience a potential
profit of up to approximately $5.196 per share that they purchased prior to the initial public offering of Tiga, or up to approximately $35.6 million in the aggregate (not giving effect to the issuance of Common Stock issuable upon exercise of
the Warrants held by them).
Certain of the selling securityholders, including G. Raymond Zage,
II and James Fu Bin Lu, and their affiliates are contractually restricted to sell or transfer certain of their shares of Common Stock, other than (i) any transfer to an affiliate of a holder, (ii) distribution to profit interest holders or other
equity holders in such holder or (iii) as a pledge in a bona fide transaction to third parties as collateral to secure obligations under leading arrangements with third parties. Such restrictions began at the Closing and end on the earliest of
(i) 365 days after the date of the Closing; (ii) the first day after the date on which the closing price of the Common Stock equals or exceeds $12.00 per share (as adjusted for stock splits, stock dividends, reorganizations, recapitalizations and
the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date of the Closing; or (iii) the date on which we complete a liquidation, merger, capital stock exchange, reorganization or other similar
transaction that results in all of our public shareholders having the right to exchange their Common Stock for cash, securities or other property.
The selling securityholders may offer, sell or distribute all or a
portion of the securities hereby registered publicly or through private transactions at prevailing market prices or at negotiated prices. We will not receive any of the proceeds from such sales of the shares of Common Stock or Warrants, except
with respect to amounts received by us upon exercise of the Warrants. The exercise price of our outstanding Warrants is $11.50 per share, which exceeds the trading price of our Common Stock as of the date of this prospectus. We will bear all
costs, expenses and fees in connection with the registration of these securities, including with regard to compliance with state securities or “blue sky” laws. The selling securityholders will bear all commissions and discounts, if any,
attributable to their sale of shares of Common Stock or Warrants. See the section titled “Plan of Distribution.”
The Common Stock and Public Warrants are listed on the New York
Stock Exchange (the “NYSE”) under the ticker symbols “GRND” and “GRND.WS,” respectively. On January 6, 2023, the last reported sales price of our Common Stock was $5.20 per share and the last reported sales
price of our Warrants were $0.55 per warrant.
We are an “emerging growth company” as defined under U.S. federal
securities laws and, as such, have elected to comply with reduced public company reporting requirements. This prospectus complies with the requirements that apply to an issuer that is an emerging growth company. We are incorporated in Delaware.
Investing in our securities involves a high
degree of risk. You should review carefully the risks and uncertainties described in the section titled “Risk Factors” beginning on page 6 of this prospectus, and under similar headings
in any amendments or supplements to this prospectus.
Neither the Securities and Exchange Commission nor
any state securities commission has approved or disapproved of these securities, or passed upon the accuracy or adequacy of this prospectus. Any representation to the contrary is a criminal offense.
Prospectus dated , 2023
TABLE OF CONTENTS
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You should rely only on the information contained in this
prospectus, any supplement to this prospectus or in any free writing prospectus, filed with the Securities and Exchange Commission (the “SEC”). Neither we, nor the selling securityholders have authorized
anyone to provide you with additional information or information different from that contained in this prospectus filed with the SEC. We take no responsibility for, and can provide no assurance as to the reliability of, any other information that
others may give you. The selling securityholders are offering to sell, and seeking offers to buy, our securities only in jurisdictions where offers and sales are permitted. The information contained in this prospectus is accurate only as of the
date of this prospectus, regardless of the time of delivery of this prospectus or any sale of our securities. Our business, financial condition, results of operations and prospects may have changed since that date.
For investors outside of the United States: Neither we, nor the
selling securityholders, have done anything that would permit this offering or possession or distribution of this prospectus in any jurisdiction where action for that purpose is required, other than in the United States. Persons outside the
United States who come into possession of this prospectus must inform themselves about, and observe any restrictions relating to, the offering of our securities and the distribution of this prospectus outside the United States.
To the extent there is a conflict between the information contained
in this prospectus, on the one hand, and the information contained in any document incorporated by reference filed with the SEC before the date of this prospectus, on the other hand, you should rely on the information in this prospectus. If any
statement in a document incorporated by reference is inconsistent with a statement in another document incorporated by reference having a later date, the statement in the document having the later date modifies or supersedes the earlier
statement.
i
This prospectus is part of a registration statement on Form S-1 that
we filed with the SEC using the “shelf” registration process. Under this shelf registration process, the selling securityholders may, from time to time, sell the securities offered by them described in this prospectus. We will not receive any
proceeds from the sale by such selling securityholders of the securities offered by them described in this prospectus. This prospectus also relates to the issuance by us of the shares of Common Stock issuable upon the exercise of any Warrants. We
will not receive any proceeds from the sale of shares of Common Stock underlying the Warrants pursuant to this prospectus, except with respect to amounts received by us upon the exercise of the Warrants for cash.
Neither we nor the selling securityholders have authorized anyone to
provide you with any information or to make any representations other than those contained in this prospectus or any applicable prospectus supplement or any free writing prospectuses prepared by or on behalf of us or to which we have referred
you. Neither we nor the selling securityholders take responsibility for, and can provide no assurance as to the reliability of, any other information that others may give you. Neither we nor the selling securityholders will make an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
We may also provide a prospectus supplement or post-effective
amendment to the registration statement to add information to, or update or change information contained in, this prospectus. You should read both this prospectus and any applicable prospectus supplement or post-effective amendment to the
registration statement together with the additional information to which we refer you in the sections of this prospectus titled “Where You Can Find More Information.”
Between November 17, 2022 and November 18, 2022, Legacy Grindr,
Tiga, Merger Sub I and Merger Sub II consummated the transactions contemplated by the Merger Agreement (as such terms are defined below), following its approval at an extraordinary general meeting of the shareholders of Tiga held on November 15,
2022. Pursuant to the terms of the Merger Agreement, a business combination of Legacy Grindr and Tiga was effected through, among other transactions, (i) the merger of Merger Sub I with and into Legacy Grindr, with Legacy Grindr as the surviving
entity, and promptly thereafter and as part of the same overall transaction as the First Merger (as defined below), (ii) the merger of Legacy Grindr with and into Merger Sub II, with Merger Sub II surviving the Second Merger (as defined below) as
a wholly owned subsidiary of Tiga. Prior to the Closing Date (as defined below), Tiga (i) changed its jurisdiction of incorporation from Cayman Islands to the State of Delaware by deregistering as an exempted company in the Cayman Islands and
domesticating and continuing as a corporation incorporated under the laws of the State of Delaware and (ii) changed its name from Tiga Acquisition Corp. to Grindr Inc.
Unless the context indicates otherwise, references in this
prospectus to the “Company,” “Grindr,” “we,” “us,” “our” and similar terms refer to Grindr, Inc. (f/k/a Tiga Acquisition Corp.) and its consolidated subsidiaries (including Legacy Grindr). References to “Tiga” refer to the predecessor company
prior to the consummation of the Business Combination (as defined below).
ii
Some of the statements contained in this prospectus constitute
forward-looking statements within the meaning of the federal securities laws. Forward-looking statements relate to expectations, beliefs, projections, future plans and strategies, anticipated events or trends and similar expressions concerning
matters that are not historical facts. These forward-looking statements include statements regarding our intentions, beliefs and current expectations and projections concerning, among other things, the Business Combination, the benefits of the
Business Combination, including results of operations, financial condition, liquidity, prospects, growth, strategies and the markets in which we operate. In some cases, you can identify these forward-looking statements by the use of terminology
such as “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “approximately,” “predicts,” “intends,” “plans,” “estimates,” “anticipates” or the negative version of these words or other comparable
words or phrases.
The forward-looking statements contained in this prospectus reflect
our current views about the Business Combination and future events and are subject to numerous known and unknown risks, uncertainties, assumptions and changes in circumstances that may cause its actual results to differ significantly from those
expressed in any forward-looking statement. There are no guarantees that the transactions and events described will happen as described (or that they will happen at all). The following factors, among others, could cause actual results and future
events to differ materially from those set forth or contemplated in the forward-looking statements:
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the success in retaining or recruiting, or changes required in, our directors, officers or key employees;
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the impact of the regulatory environment and complexities with compliance related to such environment, including maintaining
compliance with privacy and data protection laws and regulations;
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the ability to respond to general economic conditions;
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factors relating to our and our subsidiaries’ business, operations and financial performance, including:
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competition in the dating and social networking products and services industry;
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the ability to maintain and attract users;
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fluctuation in quarterly and yearly results;
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the ability to adapt to changes in technology and user preferences in a timely and cost-effective
manner;
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the ability to protect systems and infrastructures from cyber-attacks and prevent unauthorized
data access;
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the dependence on the integrity of third-party systems and infrastructure; and
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The ability to protect our intellectual property rights from unauthorized use by third parties;
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the ability to recognize the anticipated benefits of the Business Combination, which may be affected by, among other things,
competition, and our ability to manage growth and expand business operations effectively following the Closing;
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whether the concentration of our stock ownership and voting power limits our stockholders’ ability to influence corporate
matters;
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the effects of the ongoing coronavirus (COVID-19) pandemic, the 2022 mpox outbreak, or other infectious diseases, health
epidemics, pandemics and natural disasters on our business;
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the ability to maintain the listing of Common Stock and Public Warrants on the NYSE; and
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the increasingly competitive environment in which we operate.
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In addition, statements that “Grindr believes” or “we believe” and
similar statements reflect our beliefs and opinions on the relevant subjects. These statements are based upon information available to us as of the date of this prospectus, and while we believe such information forms a reasonable basis for such
statements, such information may be limited or incomplete, and such statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are
inherently uncertain and investors are cautioned not to unduly rely upon these statements.
While forward-looking statements reflect our good faith beliefs,
they are not guarantees of future performance. Except to the extent required by applicable law, we are under no obligation (and expressly disclaim any such
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obligation) to update or revise their forward-looking statements whether as a result
of new information, future events, or otherwise. For a further discussion of these and other factors that could cause our future results, performance or transactions to differ significantly from those expressed in any forward-looking statement,
please see the section titled “Risk Factors.” You should not place undue reliance on any forward-looking statements, which are based only on information currently available to us (or to third parties
making the forward-looking statements).
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“A&R Forward Purchase Agreement”
or “FPA” means the Second Amended and Restated Forward Purchase Agreement entered into as of May 9, 2022, by and between Tiga and the Sponsor, attached hereto as Exhibit 10.6 and Exhibit 10.7.
“A&R Registration Rights
Agreement” means that certain Amended and Restated Registration Rights Agreement entered into at Closing by and among Grindr, the Sponsor, the independent directors of Tiga and certain former members of Grindr, attached hereto as Exhibit
10.1.
“Backstop Commitment” means
the purchase, on a private placement basis, of the backstop shares and the backstop warrants for $50,000,000, pursuant to the A&R Forward Purchase Agreement.
“backstop shares” means the
5,000,000 shares of Common Stock subscribed, pursuant to the Backstop Commitment on the terms of the A&R Forward Purchase Agreement.
“backstop warrants” means
2,500,000 Warrants subscribed, pursuant to the Backstop Commitment on the terms of the A&R Forward Purchase Agreement.
“Business Combination” means
the transactions contemplated by the Merger Agreement, including, among other things, the Merger.
“Closing” means the closing of
the Business Combination.
“Closing Date” means
November 18, 2022, the date on which the Closing occurred.
“Common Stock” means the shares
of our common stock, $0.0001 par value per share.
“DGCL” means the General
Corporation Law of the State of Delaware.
“Domestication” means the
continuation of Tiga by way of domestication of Tiga into a Delaware corporation with the ordinary shares of Tiga becoming shares of common stock of the Delaware corporation under the applicable provisions of the Cayman Islands Companies Act (As
Revised) and the DGCL.
“First Merger” means the
merger of Merger Sub I, a direct, wholly owned subsidiary of Tiga, with and into Legacy Grindr, with Legacy Grindr continuing as the surviving entity.
“Forward Purchase Commitment”
means the purchase, on a private placement basis, of the forward purchase shares and the forward purchase warrants for $50,000,000, pursuant to the A&R Forward Purchase Agreement.
“forward purchase shares”
means the 5,000,000 shares of Common Stock purchased, on a private placement basis, pursuant to the A&R Forward Purchase Agreement.
“forward purchase warrants”
means the 2,500,000 Warrants purchased, on a private placement basis, pursuant to the A&R Forward Purchase Agreement.
“Founder Shares” means the
6,900,000 shares of Common Stock held by the Sponsor and certain of its affiliates following a private placement in connection with the initial public offering of Tiga and subsequent share recapitalization.
“Legacy Grindr” means Grindr
Group LLC, a Delaware limited liability company which, pursuant to the Business Combination, became a direct, wholly owned subsidiary of Grindr Inc., and, unless the context otherwise requires, its consolidated subsidiaries.
“Merger” means the First Merger
and Second Merger.
“Merger Agreement” means the
Agreement and Plan of Merger, dated as of May 9, 2022 (as amended by that certain First Amendment to the Initial Merger Agreement, dated as of October 5, 2022, by and among Tiga, Legacy Grindr, Merger Sub I and Merger Sub II, as it may be further
amended from time to time), by and among Tiga, Merger Sub I and Legacy Grindr.
“Merger Sub I” means Tiga
Merger Sub LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Tiga.
“Merger Sub II” means Tiga
Merger Sub II LLC, a Delaware limited liability company and a direct, wholly owned subsidiary of Tiga.
v
“Private Placement Warrants”
means the 18,560,000 warrants purchased by the Sponsor in connection with the Tiga IPO in a private placement transaction occurring simultaneously with the closing of the Tiga IPO.
“Public Warrants” means the
13,800,000 warrants included as a component of the Tiga units sold in the Tiga IPO, each of which is exercisable, at an exercise price of $11.50, for one share of Common Stock, in accordance with its terms.
“Second Merger” means the
merger of Legacy Grindr with and into Merger Sub II with Legacy Grindr continuing as the surviving entity as a direct, wholly owned subsidiary of Tiga.
“Sponsor” means Tiga Sponsor
LLC, a Delaware limited liability company, which liquidated and distributed its holdings to its ultimate beneficiaries, including G. Raymond Zage, III, the former Chairman and Chief Executive Officer of Tiga and director of Grindr, and Ashish
Gupta, the former President and director of Tiga, prior to the Closing.
“Tiga” means Tiga
Acquisition Corp. (which was renamed “Grindr Inc.” following the Domestication, and in connection with the consummation of the Business Combination).
“Tiga IPO” means Tiga’s
initial public offering, consummated on November 27, 2020.
“Warrants” means the Forward
Purchase and Backstop Warrants, Private Placement Warrants, and the Public Warrants.
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This summary highlights information contained
elsewhere in this prospectus and does not contain all of the information that you should consider in making your investment decision. Before investing in our securities, you should carefully read this entire prospectus, including our
consolidated financial statements and the related notes thereto and the information set forth in the sections titled “Risk Factors,” “Business” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our
consolidated financial statements and the notes thereto, included elsewhere in this prospectus, before deciding to invest in our shares of common stock. For purposes of this section, unless otherwise indicated or the context otherwise requires,
all references to “Grindr,” “we,” “our,” “ours,” “us” or similar terms refer to Grindr Inc. and its consolidated subsidiaries after the Closing. All references to “Legacy Grindr” refer to Grindr Group LLC and its consolidated subsidiaries prior
to the Closing. Grindr Inc., previously known as Tiga Acquisition Corp., is the new combined company in connection with the Business Combination.
Overview
Grindr
We are the world’s largest social network focused on the LGBTQ
community with approximately 10.8 million MAUs and approximately 601 thousand Paying Users (as defined below) in 2021. Our Paying Users were over 815 and 768 thousand for the three and nine months ended September 30, 2022, respectively.
According to the Frost & Sullivan Study commissioned by Legacy Grindr, we are the largest and most popular gay mobile app in the world, with more MAUs than other LGBTQ social networking applications. We enable users to find and engage with
each other, share content and experiences, and generally express themselves. We are a pioneer and leading influence on the lifestyle trends and discourse among the global LGBTQ community. We are devoted to providing a platform for social
interactions for this vibrant community and to cultivating a safe and accepting environment where all are welcome and feel a sense of belonging. As a result, the Grindr platform has become a meaningful part of users’ social lives and has
embedded us at the center of the community as the preferred channel for broadening their connections and engaging with like-minded individuals within the LGBTQ community. Our business, founded in 2009, is held by Legacy Grindr, a Delaware
limited liability company which was incorporated in April 2020. The mailing address of our principal executive office is PO Box 69176, West Hollywood, CA 90069.
Implications of Being an Emerging Growth Company
We are an emerging growth company, as defined in the Jumpstart Our
Business Startups Act of 2012, as amended, and therefore we intend to take advantage of certain exemptions from various public company reporting requirements, including not being required to have our internal control over financial reporting
audited by our independent registered public accounting firm pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, reduced disclosure obligations regarding executive compensation in this prospectus, our periodic reports and our proxy
statements and exemptions from the requirements of holding a nonbinding advisory vote on executive compensation and any golden parachute payments not previously approved. We will remain an emerging growth company until the earliest of (i) the
last day of the fiscal year in which the market value of our Common Stock that is held by non-affiliates equals or exceeds $700 million as of the end of that year’s second fiscal quarter, (ii) the last day of the fiscal year in which we have
total annual gross revenue of $1.235 billion or more during such fiscal year (as indexed for inflation), (iii) the date on which we have issued more than $1.00 billion in non-convertible debt in the prior three-year period or (iv) December 31,
2026.
Summary of Risk Factors
Below is a summary of material factors that make an investment in
our securities speculative or risky. Importantly, this summary does not address all of the risks and uncertainties that we face. Additional discussion of the risks and uncertainties summarized in this risk factor summary, as well as other risks
and uncertainties that we face, can be found under the section titled “Risk Factors” in this prospectus. The below summary is qualified in its entirety by that more complete discussion of such risks and
uncertainties. You should carefully consider the risks and uncertainties described under the section titled “Risk Factors” as part of your evaluation of an investment in our securities:
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Our business depends on the strength and market perception of the Grindr brand, and if events occur that damage our
reputation and brand, our ability to expand its base of users may be impaired, and our business could be materially and adversely affected.
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Changes to our existing products and services, or the development and introduction of new products and services, could fail
to attract or retain users or generate revenue and profits.
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If we fail to retain existing users or add new users, or if our users decrease their level of engagement with its products
and services or do not convert to paying users, our revenue, financial results and business may be significantly harmed.
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Inappropriate actions by certain of our users could be attributed to us and damage our brand or reputation, or subject us to
regulatory inquiries, legal action, or other liabilities, which, in turn, could materially adversely affect its business.
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Unfavorable media coverage could materially and adversely affect our business, brand, or reputation.
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The online social networking industry in which we operate is highly competitive, and if we cannot compete effectively our
business will suffer.
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Our quarterly operating results and other operating metrics may fluctuate from quarter to quarter, which makes these metrics
difficult to predict.
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The distribution, marketing of, and access to our products and services depend, in large part, on third-party platforms and
mobile application stores, among other third-party providers. If these third parties limit, prohibit, fail to operate, or otherwise interfere with the distribution or use of our products or services in any material way, it could
materially and adversely affect our business, financial condition, and results of operations.
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Privacy concerns relating to our products and services and the use of user information could negatively impact its user base
or user engagement, which could have a material and adverse effect on our business, financial condition, and results of operations.
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We rely primarily on the Apple App Store and Google Play Store as the channels for processing of payments. In addition,
access to our products and services depend on mobile App stores and other third parties such as data center service providers, as well as third-party payment aggregators, computer systems, internet transit providers and other
communications systems and service providers. Any deterioration in our relationship with Apple, Google or other such third parties may negatively impact our business.
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Adverse social and political environments for the LGBTQ community in certain parts of the world, including actions by
governments or other groups, could limit our geographic reach, business expansion, and user growth, any of which could materially and adversely affect our business, financial condition, and results of operation.
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We have identified material weaknesses in its internal control over financial reporting which, if not corrected, could affect
the reliability of our consolidated financial statements, and have other adverse consequences.
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Security breaches, unauthorized access to or disclosure of our data or user data, other hacking and phishing attacks on our
systems, or other data security incidents could compromise sensitive information related to our business and/or user personal data processed by us or on our behalf and expose us to liability, which could harm its reputation, generate
negative publicity, and materially and adversely affect our business.
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Our success depends, in part, on the integrity of its information technology systems and infrastructures and on our ability
to enhance, expand, and adapt these systems and infrastructures in a timely and cost-effective manner.
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Our success depends, in part, on our ability to access, collect, and use personal data about our users and to comply with
applicable privacy and data protection laws and industry best practices.
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Our business is subject to complex and evolving U.S. and international laws and regulations. Many of these laws and
regulations are subject to change or uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of operations, declines in user growth or engagement, negative publicity;
or other harm to our business.
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The varying and rapidly evolving regulatory framework on privacy and data protection across jurisdictions could result in
claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
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We are subject to litigation, regulatory and other government investigations, enforcement actions, and settlements, and
adverse outcomes in such proceedings could have a materially adverse effect on our business, financial condition, and results of operation.
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Activities of our users or content made available by such users could subject us to liability.
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Our indebtedness could materially adversely affect our financial condition, our ability to raise additional capital to fund
our operations, operate our business, react to changes in the economy or its industry, meet our obligations under our outstanding indebtedness, including significant operating and financial restrictions imposed on Grindr by our debt
agreements, and we could divert our cash flow from operations for debt payments.
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The Business Combination remains subject to review by CFIUS and we are not certain how the outcome of the review will impact
the Business Combination or our business.
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Please see the section entitled “Risk
Factors” beginning on page 6 of this prospectus for a discussion of these and other factors you should consider in evaluating our business.
Corporate Information
Our principal executive offices are located at 750 N. San Vicente
Blvd., Suite RE 1400, West Hollywood, CA 90069 and our telephone number is (310) 776-6680. Our corporate website address is www.grindr.com. Information contained on or accessible through our website is not a part of this prospectus, and the
inclusion of our website address in this prospectus is an inactive textual reference only.
We and our subsidiaries own or have rights to trademarks, trade
names and service marks that they use in connection with the operation of their business. Other trademarks, trade names and service marks appearing in this prospectus are the property of their respective owners. Solely for convenience, in some
cases, the trademarks, trade names and service marks referred to in this prospectus are listed without the applicable ®, ™ and SM symbols.
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The Offering
Issuance of Common Stock
Shares of Common Stock offered by us
Up to 37,360,000 shares of Common Stock, including shares of Common Stock
issuable upon exercise of the Private Placement Warrants and Public Warrants, consisting of (i) up to 18,560,000 shares of Common Stock that are issuable upon the exercise of up to 18,560,000 Private Placement Warrants, (ii) up to 13,800,000
shares of Common Stock that are issuable upon the exercise of up to 13,800,000 Public Warrants, and (iii) up to 5,000,000 shares of Common Stock issuable upon the exercise of up to 5,000,000 FPA Warrants.
Shares of Common Stock outstanding prior to the
exercise of all Warrants
173,524,360 shares (as of January 6, 2023).
Shares of Common Stock outstanding assuming exercise
of all Warrants
210,884,360 shares (based on total shares outstanding as of January 6, 2023).
Exercise price of Warrants
$11.50 per share, subject to adjustment as described herein.
Use of proceeds
We will receive up to an aggregate of approximately $429,640,000 from the
exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes. The exercise price of our Public Warrants and Private
Placement Warrants is $11.50 per warrant. We believe the likelihood that warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our Common Stock. If
the trading price for our Common Stock is less than $11.50 per share, we believe holders of our Warrants will be unlikely to exercise their warrants. To the extent that our Warrants are exercised on a “cashless basis,” the amount of cash we
would receive from the exercise of such Warrants will decrease. However, we would receive the cash proceeds upon exercise of warrants for cash, which exercise will depend on the price of our Common Stock. If the warrants are out of the money,
the warrant holders are not likely to exercise their warrants. See the section titled “Use of Proceeds.”
Resale of Common Stock and Warrants
Shares of Common Stock offered by the selling
securityholders
We are registering the resale by the selling securityholders named in this
prospectus, or their permitted transferees, an aggregate of 174,971,961 shares of Common Stock, consisting of:
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up to 6,900,000 Founder Shares;
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up to 144,214,804 shares of Common Stock owned by certain equityholders of Legacy Grindr, pursuant to the A&R
Registration Rights Agreement;
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up to 5,000,000 shares of Common Stock are issuable upon the exercise of the FPA Warrants;
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up to 297,157 shares of Common Stock acquirable upon the exercise of certain options; and
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up to 18,560,000 shares of Common Stock issuable upon the exercise of the Private Placement Warrants.
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Warrants offered by the selling securityholders
Up to 23,560,000 Warrants consisting of (a) up to 18,560,000 Private Placement
Warrants and (b) up to 5,000,000 FPA Warrants.
Redemption
The Public Warrants are redeemable in certain circumstances. See the section
titled “Description of Our Securities—Warrants.”
Lock-Up Agreements
Certain of our securityholders are subject to certain restrictions on transfer
until the termination of applicable lock-up periods. See the section titled “Certain Relationships and Related Party Transactions—A&R Registration Rights Agreement.”
Terms of the offering
The selling securityholders will determine when and how they will dispose of the
securities registered for resale under this prospectus.
Use of proceeds
We will not receive any proceeds from the sale of shares of Common Stock or
Warrants by the selling securityholders.
Risk factors
Before investing in our securities, you should carefully read and consider the
information set forth in the section titled “Risk Factors” beginning on page 6.
NYSE ticker symbols
“GRND” and “GRND.WS”
For additional information concerning the offering, see the
section titled “Plan of Distribution” beginning on page 154.
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Investing in our securities involves a high
degree of risk. Before you make a decision to buy our securities, in addition to the risks and uncertainties discussed above under “Special Note Regarding Forward-Looking Statements,” you should carefully consider the risks and uncertainties
described below together with all of the other information contained in this prospectus, including our financial statements and related notes appearing at the end of this prospectus and in the section titled “Management’s Discussion and Analysis
of Financial Condition and Results of Operations,” before deciding to invest in our securities. If any of the events or developments described below were to occur, our business, prospects, operating results, and financial condition could suffer
materially, the trading price of our securities could decline, and you could lose all or part of your investment. The risks and uncertainties described below are not the only ones we face. Additional risks and uncertainties not presently known to
us or that we currently believe to be immaterial may also adversely affect our business.
Risks Related to our Brand, Products and Services, and Operations
Our business depends on the strength and market
perception of the Grindr brand and if events occur that damage our reputation and brand, our ability to expand our base of users may be impaired, and our business could be materially and adversely affected.
We believe that our brand has significantly contributed to the
success of our business. Our business and financial performance are highly dependent on the strength and market perception of our brand. We have achieved significant organic growth mainly through word-of-mouth referrals to our platform, without
relying on traditional advertising for user acquisition, and therefore we believe it is critical to ensure that our users remain favorably inclined toward the Grindr brand. In addition, we believe that maintaining and enhancing our brand will be
critical to expanding our user base, advertising relationships, and other partnerships.
Maintaining and enhancing our brand will depend on an array of
factors, including our ability to continue to provide useful, fun, reliable, trustworthy, and innovative products and services, which we may not do successfully or as successfully as we hope. Our products and services may not always appeal to our
users, which may negatively affect our brand and our ability to retain existing users, upgrade users to paid accounts or add new users. See “—If we fail to retain existing users or add new users, or if our users
decrease their level of engagement with our products and services or do not convert to paying users, our revenue, financial results, and business may be significantly harmed.” In addition, the actions of our advertisers or partners may
negatively affect our brand if users have a negative impression of such brands or do not have a positive experience using third-party products or services that are integrated into our platform. See “—The
distribution, marketing of, and access to our products and services depends, in large part, on third-party platforms and mobile application stores, among other third-party providers. If these third parties limit, prohibit, fail to operate, or
otherwise interfere with the distribution or use of our products and services in any material way, it could adversely affect our business, financial condition, and results of operations.” Moreover, illicit or inappropriate conduct by
users, advertisers, partners, or bad actors may adversely affect our brand, particularly if we fail to respond expeditiously to objectionable content on our platform or otherwise to address user concerns. See “—Inappropriate
actions by certain of our users could be attributed to us and damage our brand or reputation, or subject us to regulatory inquiries, legal action, or other liabilities, which, in turn, could materially adversely affect our business.” We
have also experienced, and expect to continue to experience, media, legislative, and regulatory scrutiny, as well as legal action and regulatory investigations, regarding user privacy and data protection, interactions between users, and other
issues, which have harmed our reputation and brand and may seriously harm our reputation and brand in the future. See “—Unfavorable media coverage could materially and adversely affect our business, brand, or
reputation.” If events occur that damage our reputation or brand, our business, financial condition, and results of operations could be materially and adversely affected.
Changes to our existing products and services,
or the development and introduction of new products and services, could fail to attract or retain users or generate revenue and profits.
Our ability to retain, expand, monetize and engage our user base,
and to increase our revenue, depends heavily on our ability to keep pace with user demands and technological changes in the industry by, among other things, continuing to evolve our existing products and services and developing successful new
products and services. We operate in an industry characterized by rapidly changing technologies in response to evolving industry standards, frequent new product and service announcements and enhancements, and changing user demands, and our
competitors in the online social networking industry are constantly developing new technologies and products and services. Our performance will therefore depend on our ability to adapt in response to this environment by, among
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other things, continuing to improve the speed, performance, features, ease of use,
and reliability of our products and services, in response to evolving user demands and competitive dynamics. Any failure to keep pace with rapid technological changes could cause us to lose market share and thus have a material adverse effect on
our business, financial condition, and results of operation.
In addition, our ability to retain, expand, monetize and engage our
user base, and to increase our revenue, depends on our ability to continue to improve our existing products and services and to develop and introduce successful new products and services, both independently and together with third parties. We may
introduce significant changes to our existing products and services or develop and introduce new or unproven products and services, including using technologies with which we have little or no prior development or operating experience. While we
believe we can further improve our monetization capabilities by diversifying our subscription offerings, introducing more stand-alone premium functions, and further optimizing our advertising offerings, these efforts may not ultimately be
successful or translate into meaningful additional revenue. If we do not continue to innovate and provide attractive products and services to our users, or if we fail to consistently tailor our products and services to accommodate our users’
changing demands, we may not be able to retain a large and active user base or to generate sufficient revenue, operating margin, or other value, to justify our investments, any of which may materially adversely affect our business.
We have also invested in, and expect to continue to invest in new
products and services and other initiatives, which may involve unproven products, services, and technologies, to generate revenue. We regularly update our Grindr mobile application (the “Grindr App”) to introduce new features and improve our
Grindr App’s performance. However, there is no guarantee that our investment in new products and services, new features, and other initiatives will succeed or generate revenue or other benefits for us. New products, services, and features may
provide temporary increases in engagement that may ultimately fail to attract and retain users such that they may not produce the long-term benefits that we expect. We may also introduce new products, services, features or terms of service or
policies, and seek to find new, effective ways to show our community new and existing products and services and alert them to events and opportunities to connect, that our users do not like, which may negatively affect our brand. If our new or
enhanced brand, products and services or product extensions fail to engage users, marketers, or developers, or if our business plans are unsuccessful, we may fail to attract or retain users or to generate sufficient revenue, operating margin, or
other value to justify our investments, any of which may materially adversely affect our business.
If we fail to retain existing users or add new
users, or if our users decrease their level of engagement with our products and services or do not convert to paying users, our revenue, financial results, and business may be significantly harmed.
The size of our user base and our users’ level of engagement are
critical to our success. Our financial performance has been and will continue to be significantly determined by our success in adding, retaining, and engaging users of our products and services and converting users into paying subscribers or
premium add-on payers. We expect that the size of our user base will fluctuate or decline in one or more markets from time to time. If our user growth rate slows down, our business performance will become increasingly dependent on our ability to
retain existing users and enhance user engagement on our platform in current and new markets. In addition, although we have primarily grown our user base organically, attracting and retaining additional users for our products and services may
require increasingly large sales and marketing expenditures. If our platform ceases to be one of the most frequently used social networking applications for LGBTQ individuals, or if people do not perceive our products and services to be useful,
reliable, and/or trustworthy, we may not be able to attract or retain users or otherwise maintain or increase the frequency, duration, and depth of their engagement.
Several other online social networking companies that achieved early
popularity have since experienced slower growth or declines in their user bases or levels of engagement. We may experience a similar erosion of our user base or engagement levels, particularly as we achieve higher market penetration rates. User
engagement can be difficult to measure, particularly as we introduce new and different products and services. Any number of factors can negatively affect user retention, growth, and engagement, including if:
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users increasingly engage with competing products or services;
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user behavior on any of our products and services change, including decreases in the quality of the user base and frequency of
use of our products and services;
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our competitors mimic our products and services or penetrate our markets (or markets we would like to enter) and therefore harm
our user retention, engagement, and growth;
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users have difficulty installing, updating, or otherwise accessing our products and services on mobile devices because of
actions by us or third parties that we rely on to distribute our products and services;
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we fail to introduce new and improved products and services that appeal to our users, or if we make changes to existing
products and services that do not appeal to our users;
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we are unable to continue to develop products and services that work with a variety of mobile operating systems, networks, and
smartphones;
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users are no longer willing to pay for premium (fee-based) subscriptions or premium add-ons;
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we are unable to successfully balance our efforts to provide a compelling user experience with the decisions we make with
respect to the frequency, prominence, and size of advertisements and other commercial content that we display on our platform;
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we fail to protect our brand image or reputation;
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we experience decreases in user sentiment related to the quality of our products and services, or based upon concerns related
to data privacy and the sharing of user data, safety, security, or well-being, among other factors;
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we, or other companies in the industry, are the subject of adverse media reports or other negative publicity, including because
of our data practices or other companies’ data practices;
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we fail to keep pace with evolving online, market, and industry trends (including the introduction of new and enhanced digital
services);
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initiatives designed to attract and retain users and engagement are unsuccessful or discontinued;
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we adopt terms, policies, or procedures concerning user data or advertising, among other areas, that are perceived negatively
by our users or the general public;
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we are unable to combat inappropriate or abusive use of our platform;
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we fail to address user or regulatory concerns related to privacy, data security, personal safety, or other factors;
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we are unable to manage and prioritize information to ensure users are presented with content that is interesting, useful and
relevant to them;
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we fail to provide adequate customer service to users, advertisers, or other partners;
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technical or other problems prevent us from delivering our products and services in a rapid and reliable manner or otherwise
affect the user experience, such as security breaches, distributed denial-of-service attacks or failure to prevent or limit spam or similar content;
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our current or future products and services reduce user activity on Grindr by making it easier for our users to interact and
share on third-party websites;
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third-party initiatives that may enable greater use of our products and services, including low cost or discounted data plans,
are discontinued;
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there is decreased engagement with our products and services because of changes in prevailing social, cultural, or political
preferences in the markers in which we operate; and
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there are changes mandated by legislation, regulations, or government actions.
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From time to time, certain of these factors have negatively affected
user retention, growth, and engagement to varying degrees. If we are unable to maintain or increase our user base and user engagement, our revenue and financial results may be materially adversely affected. In addition, we may not experience
rapid user growth or engagement in countries where, even though mobile device penetration is high, due to the lack of sufficient cellular based data networks, consumers rely heavily on Wi-Fi and may not access our products and services regularly
throughout the day. Any decrease in user retention, growth, or engagement could render our products and services
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less attractive to users, which is likely to have a material and adverse impact on
our revenue, business, financial condition, and results of operations. If our user growth rate slows or declines, we will become increasingly dependent on our ability to maintain or increase levels of user engagement and monetization to drive
revenue growth.
Inappropriate actions by certain of our users
could be attributed to us and damage our brand or reputation, or subject us to regulatory inquiries, legal action, or other liabilities, which, in turn, could materially adversely affect our business.
Our platform allows users to freely connect and communicate with
other users. Our platform may be misused by individuals or groups of individuals to engage in illicit or otherwise inappropriate activities, which may adversely affect the public perception of our brand and our ability to retain existing users or
add new users. Our content moderation team frequently detects and addresses user actions that violate our Terms and Conditions of Service, Communities Guidelines, or other policies applicable to our platform, which prohibit, among other things,
any form of harassment, hate speech, violence of any kind, and other offensive content; profile pictures with nudity, pornography, or drugs; impersonation of another person; minor activity on the platform (including uploading images depicting
minors or communicating with another user believed to be a minor); and illegal actions such as the advertising of sexual services or drugs. With a combination of human moderation and automated tooling, violations are frequently detected and
addressed by our content moderation team, and we expect to continue to endeavor to detect and address these issues in the future.
While we have systems and processes in place that aim to monitor and
review the appropriateness of the content generated on our platform, including our content moderation team, automated tools, and in-App features that allow users to report illicit or otherwise inappropriate activity to us, and have adopted
policies regarding the illicit or otherwise inappropriate use of our products and services, our users have in the past, and could in the future, nonetheless engage in activities on our platform that violate our policies or the law. These
safeguards may not be sufficient to ensure the safety of our users and this may harm our reputation and brand, especially if any instances of illicit or otherwise inappropriate conduct become well-publicized, as has occurred in the past.
In addition, while our policies attempt to address the illicit or
otherwise inappropriate use of our products and services, and we publish and make available resources that provide users with information designed to help protect users’ digital security, personal safety (both on, and off, our Grindr App), and
self-care, we do not control what happens if our users decide to meet in person after connecting on our platform.
Our platform allows users to freely connect and communicate with
other users in the same geographic area or in the other geographic areas around the world through the “Explore” feature. Users of our products and services have been, and may in the future be, physically, financially, emotionally, or otherwise
harmed by other individuals that they have met or may meet through the use of our products and services. For example, we have in the past received, and could in the future receive, complaints about users being assaulted or subjected to other
forms of illicit conduct after meeting other users in person through our products and services. When one or more of our users suffers or alleges to have suffered any harm either on our platform or in person after meeting another user on our
platform, we have in the past, and could in the future, experience legal action, regulatory investigations, or negative publicity that could damage our brand and reputation. See “—Risks Related to Regulation and
Litigation—We are subject to litigation, regulatory and other government investigations, enforcement actions, and settlements, and adverse outcomes in such proceedings could have a materially adverse effect on our business, financial condition,
and results of operation.” Similar events with respect to users of our competitors’ products and services could result in negative publicity for the overall social networking industry, or the LGBTQ social networking industry more
specifically, which could in turn negatively affect our business, financial condition, and results of operation. See “—Unfavorable media coverage could materially and adversely affect our business, brand, or
reputation.”
Unfavorable media coverage could materially and
adversely affect our business, brand, or reputation.
We receive a high degree of media coverage around the world, partly
due to the social and cultural sensitivity associated with the unique demographic group that we serve, all of which has affected, and could in the future affect, the reputation and market perception of our brand. Regardless of its accuracy or
authenticity, negative publicity concerning us, including media coverage regarding the actions of our users on or off our platform, our Terms and Conditions of Service or privacy practices, the quality or safety of our products and services, the
actions of our advertisers or other partners, litigation or regulatory activity, and/or the actions of other companies that provide similar services to us, could materially and adversely affect our brand, which could, in turn, materially and
adversely
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affect the size, engagement, and loyalty of our user base, as well as the number and
quality of advertisers that choose to advertise on our platform. For example, since at least 2016, multiple news outlets and research groups have identified ways to allegedly determine the precise geolocation of users of Grindr and similar
services. Although we do not always use the full precision of the user’s location, and our users have the choice not to display their relative location in the Grindr cascade, trilateration, the process of estimating a user’s location by combining
the distance measurement from three points surrounding a user, is a common risk in location-based apps and could be perceived as a threat to users’ location privacy in some jurisdictions. These risks have led to multiple regulatory inquiries. See
“Risks Related to Regulation and Litigation—The varying and rapidly evolving regulatory framework on privacy and data protection across jurisdictions could result in claims, changes to our business practices,
monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.”
Additionally, in 2018, negative media reports raised concerns,
leading to multiple regulatory inquiries, regarding our sharing of user-provided HIV status with service providers that we engaged to perform analytics services to help us improve the user experience. Although our users had consented to sharing
their profile data with service providers, we had contractual protections limiting service provider use of user data, and the user data was shared in compliance with those contractual obligations and with applicable law , in response to the media
reports and investigations, we discontinued sharing user-provided HIV status information with these service providers, among other measures. This unfavorable media coverage created negative sentiment regarding our brand and our privacy practices
among our current and potential user base, advertisers, platform partners, and other stakeholders as well as the general public, some of which continues to this day. See “—Risks Related to Regulation and
Litigation—The varying and rapidly evolving regulatory framework on privacy and data protection across jurisdictions could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in
user growth or engagement, or otherwise harm our business.” Furthermore, in 2021, a religious blog claimed to have used a “commercially available” data set which contains “signal” data which allegedly included Grindr’s “data,” among
other unidentified sources, to reveal that a Catholic priest had utilized Grindr’s app, resulting in that priest resigning his position. Although in response to the blog we took steps to clarify our data practices (and to inquire into the
potential data sources relied on by the blog), the blog may have created negative sentiment regarding our brand and our privacy practices, regardless of the accuracy or authenticity of the blog.
We cannot assure you that we will be able to defuse negative
publicity about us and/or our services to the satisfaction of our users, advertisers, platform partners, and other stakeholders. If we fail to protect our brand or reputation, given our reliance on the strength of our brand and organic growth, we
may experience material adverse effects to the size, demographics, engagement, and loyalty of our user base, resulting in decreased revenue, fewer App installs (or increased App uninstalls), fewer conversions to premium subscription versions of
our Grindr App, or slower user growth rates, among other negative effects. Negative publicity, especially when it is directly addressed against us, may also require us to engage in defensive media campaigns which, in turn, may cause us to
increase our marketing expenses and divert our management’s attention and may adversely impact our business and results of operations. If events occur that damage our brand and reputation and we fail to respond promptly or if we incur excessive
expenses in these types of efforts, our business, financial condition and results of operations could be materially and adversely affected. See “—Our business depends on the strength and market perception of the
Grindr brand. If events occur that damage our reputation and brand, our ability to expand our base of users may be impaired, and our business could be materially adversely affected”.
The online social networking industry in which
we operate is highly competitive, and if we cannot compete effectively our business will suffer.
The online social networking industry is highly competitive, with a
consistent stream of new products and services and entrants. We compete primarily with other global companies that provide dating and networking products and services that have LGBTQ users, such as Tinder and OKCupid, and regional companies that
provide dating and networking products and services for LGBTQ users, such as Scruff and PlanetRomeo. Some of our competitors may enjoy better competitive positions in certain geographical regions, user demographics, or other key areas that we
currently serve or may serve in the future. These advantages could enable these competitors to offer products and services that are more appealing to users and potential users than our products and services, or to respond more quickly and/or
cost-effectively than us to new or changing opportunities. In addition, to the extent that some of our competitors were first movers in particular geographic regions, their positions in those regions could create barriers to our entry.
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In addition, within the social networking industry more
generally, costs for users to switch between products and services are low, and users have a propensity to try new approaches to connecting with other people and to use multiple products and services at the same time. As a result, new products
and services, entrants, and business models are likely to continue to emerge. It is possible that a new product could gain rapid scale at the expense of existing brands through harnessing a new technology or distribution channel, or a new or
existing distribution channel, creating a new approach to connecting people or some other means.
Potential competitors include larger companies that could devote
greater resources to the promotion or marketing of their products and services, take advantage of acquisition or other opportunities more readily than we do, or develop and expand their products and services more quickly than we do. Potential
competitors also include established social media companies, which may develop products and services, features, or services that compete with ours, and which may have easier access to new markets or potential users than we do. For example,
Facebook recently launched Facebook Dating in North America, Europe, and other markets around the globe. Facebook and similar competitors could gain competitive advantages over Grindr through, for example, their access to existing large pools of
potential users and preexisting information about those potential users and/or their strong or dominant positions in one or more markets, or by offering different product features or products and services at low or no cost to users. Our
competitors may develop products and services, features, or services similar to ours or that achieve greater market acceptance than our products and services, features, or services, they may undertake more far-reaching and successful product
development efforts or marketing campaigns than we do, or they may adopt more aggressive pricing policies than we do. Any of these efforts, if successful, may enable our competitors to acquire and engage users at the expense of our user growth or
engagement, which may have a material adverse effect on our business, financial condition, and results of operation. See “—If we fail to retain existing users or add new users, or if our users decrease their
level of engagement with our products and services or do not convert to paying users, our revenue, financial results, and business may be significantly harmed.”
Moreover, in emerging international markets, where mobile devices
often lack large storage capabilities, among other technical limitations, we may compete with other applications for the limited space available on a user’s mobile device. We also face competition from traditional and online media businesses for
advertising budgets. As we introduce new products and services, as our existing products and services evolve, or as other companies introduce new products and services, we may become subject to additional competition.
In addition, we believe that our ability to compete effectively
depends upon many factors both within and beyond our control, including:
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the usefulness, ease of use, performance, and reliability of our products and services compared to our competitors;
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the size and demographics of our user base;
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the scale, growth, and engagement of our users with our products and services relative to those of our competitors;
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our ability to acquire efficiently new users for our products and services;
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the timing and market acceptance of our products and services;
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our ability to introduce new, and improve on existing, features, products and services, and services in response to
competition, user sentiment or requirements, online, market, social, and industry trends, the ever-evolving technological landscape, and the ever-changing regulatory landscape (in particular, as it relates to the regulation of online
social networking platforms);
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our ability to continue monetizing our products and services;
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the frequency, size, and relative prominence of the ads and other commercial content displayed by us or our competitors;
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our customer service and support efforts;
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the reputation of our brand for trust and safety and privacy and data protection, among other things;
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adverse media reports or other negative publicity;
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the effectiveness of our advertising and sales teams;
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continued growth in internet access and smartphone adoption in certain regions of the world, particularly emerging markets;
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changes mandated by legislation, regulatory authorities, or litigation, including settlements and consent decrees, some of
which may have a disproportionate effect on us;
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acquisitions or consolidations within our industry, which may result in more formidable competitors;
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our ability to attract, retain, and motivate talented employees, particularly software engineers;
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our ability to protect our intellectual property, including against our competitors’ possible attempts to mimic or copy aspects
of our Grindr App;
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our ability to cost-effectively manage and grow our operations; and
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our ability to maintain the value and reputation of our brand relative to our competitors.
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If we are not able to effectively compete against our current or
future competitors and products and services that may emerge, our user base and level of user engagement may decrease, which could have a material adverse effect on our business, financial condition, and results of operations.
We have grown rapidly in recent years and
certain members of our management team have joined us recently. If we are unable to manage our growth effectively, our brand, company culture, and financial performance may suffer.
Since launching our platform in 2009, we have experienced rapid
growth and demand for our services. We have expanded our operations rapidly worldwide, and certain members of our management team have joined us recently. As we grow, our business becomes increasingly complex and the process of implementing
operations at scale takes time. We have increased our employee headcount, and we expect our headcount growth to continue for the foreseeable future. To effectively manage and capitalize on our growth, we must continue to expand our sales and
marketing, focus on innovative product and content development, and upgrade our information systems and other processes, among other changes. Our continued growth could strain our existing resources, and we could experience ongoing operating
difficulties in managing our business across numerous jurisdictions, including difficulties in hiring, training, and managing a diverse, remote-first, and growing employee base. We expect to continue to make investments to maintain and improve
the capacity, capability and reliability of our infrastructure. To the extent that we do not effectively address capacity constraints as we grow and continually develop our technology and infrastructure to accommodate actual and anticipated
changes in technology, our business and results of operations may be negatively affected. Failure to scale and preserve our company culture with growth could harm our future success, including our ability to retain and recruit personnel and to
focus on and pursue our corporate objectives effectively. If our management team does not effectively manage our growth, we may experience erosion to our brand, the quality of our products and services may suffer, and our company culture may be
harmed. Moreover, we have been, and may in the future be, subject to legacy claims or liabilities arising from policies, systems, and/or controls in earlier periods of our rapid development.
The rapidly evolving nature of the markets in which we operate
creates substantial uncertainty concerning how these markets may develop, and reduce our ability to accurately forecast quarterly or annual revenue and future growth. Failure to manage our future growth effectively could have a material adverse
effect on our business, financial condition, and operating results.
Our quarterly operating results and other
operating metrics may fluctuate from quarter to quarter, which makes these metrics difficult to predict.
Our quarterly operating results and other operating metrics have
fluctuated in the past and may continue to fluctuate from quarter to quarter, which makes them difficult to predict. Our financial condition and operating results in any given quarter can be influenced by numerous factors, many of which we cannot
predict or are outside of our control, including:
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fluctuations in the rate at which we retain existing users and attracts new users, the level of engagement by our users, or our
ability to convert users from the free version of the platform to premium (fee-based) subscriptions;
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our development, improvement, and introduction of new products and services, services, technology, and features, and the
enhancement of existing products and services, services, technologies, and features;
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successful expansion into international markets, particularly in emerging markets;
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errors in our forecasting of user demand;
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increases in engineering, product development, marketing, or other operating expenses that we may incur to grow and expand
operations and to remain competitive;
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changes in our relationship with Apple, Google, or other third parties;
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announcements by competitors of significant new products and services, services, licenses, or acquisitions;
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the diversification and growth of our revenue sources;
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our ability to maintain gross margins and operating margins;
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fluctuations in currency exchange rates and changes in the proportion of our revenue and expenses denominated in foreign
currencies;
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changes in our effective tax rate;
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changes in accounting standards, policies, guidance, interpretations, or principles;
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the continued development and upgrading of our technology platform;
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our ability to effectively prevent and remediate system failures or breaches of security or privacy;
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our ability to obtain, maintain, protect and enforce intellectual property rights and successfully defend against claims of
infringement, misappropriation, or other violations of third-party intellectual property;
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adverse litigation judgments, settlements, or other litigation-related costs;
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changes in the legislative or regulatory environment, including with respect to privacy, intellectual property, consumer
product safety, and advertising, or enforcement by government regulators, including fines, orders, or consent decrees; and
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changes in business or macroeconomic conditions, including the impact of the current COVID-19 outbreak, inflation, lower
consumer confidence in our business or in the social networking industry generally, recessionary conditions, increased unemployment rates, stagnant or declining wages, political unrest, armed conflicts, or natural disasters.
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Any one of the factors above or the cumulative effect of some of the
factors above may result in significant fluctuations in our results of operations.
The variability and unpredictability of our quarterly operating
results or other operating metrics could result in our failure to fully meet the expectations or those of analysts that could cover us or investors with respect to revenue or other operating results for a particular period. If we fail to meet or
exceed such expectations, the market price of the stock could fall substantially, and we could face costly lawsuits, including securities class action suits.
The distribution, marketing of, and access
to our products and services depend, in large part, on third-party platforms and mobile application stores, among other third-party providers. If these third parties limit, prohibit, or fail to operate, or otherwise interfere with the
distribution or use of our products or services in any material way, it could materially and adversely affect our business, financial condition, and results of operations.
We market and distribute our products and services primarily through
the Apple App Store and Google Play Store. We are subject to the standard terms, conditions, and guidelines of these platforms for App developers, which govern the promotion and distribution of our products and services on their respective
platforms, and our ability to market the Grindr brand on any given property or channel is subject to the policies of the relevant third party. In addition, there is no guarantee that these popular mobile platforms will continue to feature or make
available our products, or that we will be able to comply with the standard terms, conditions, and guidelines of these platforms, such that our products and services continue to be available through these platforms. Apple App Store and Google
Play Store have and may continue to impose access restrictions for users in Russia and other geopolitical regions in relation to the conflict between Russia and Ukraine or other events that are beyond Grindr’s control, such as
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terrorism, public health crises, or political unrest, which could result in the
inability to access and use our products and services and other negative experiences for our users and, in turn, harm our user reputation and adversely affect our business. In addition, there is no guarantee that users will continue to use our
products and services rather than competing products and services.
We also depend on the interoperability of our products and services
with popular mobile operating systems, networks, technologies, products and services, and standards that we do not control, such as the iOS and Android operating systems. Any changes, bugs, or technical issues in these systems, or changes in our
relationships with third party product or service providers such as our mobile operating system partners, handset manufacturers, or mobile carriers, or changes in their agreements, terms of service or policies that degrade our products and
services’ functionality, reduce or eliminate our ability to update or distribute our products and services, give preferential treatment to competitive products and services, limit our ability to deliver, target, or measure the effectiveness of
ads, or charge fees related to the distribution of our products and services or our delivery of ads, could impact the usage of our products and services on mobile devices and have a material adverse effect on our business, financial condition,
and results of operations. For example, starting with iOS version 14, Apple has required App developers to ask users for their permission to track them or to access their device’s advertising identifier (known as the IDFA). Tracking refers to the
act of linking user or device data collected from one App with user or device data collected from other companies’ Apps, websites, or offline properties for targeted advertising (e.g., personalized ads) or advertising measurement purposes. As of
September 30, 2021, iOS App users’ opt-in rate to grant IDFA access was approximately 21%. As such, the ability of advertisers to accurately target and measure their advertising campaigns at the user level has become, and may continue to be,
significantly limited and App developers may experience increased cost per registration.
In addition, certain channels have, from time to time, limited or
prohibited advertisements for similar products and services, including because of poor behavior by other industry participants. There is no assurance that we will not be limited or prohibited from using certain current or prospective marketing
channels or providing certain features in the future.
Further, many users historically registered for (and logged into)
our Grindr App exclusively through their Apple IDs, Google usernames, or Facebook profiles. While we have alternate authentication methods that allow users to register for (and log into) our Grindr App using an email address or their mobile phone
numbers, there can be no assurances that users will use these other methods. Apple, Google, and Facebook have broad discretion to change their terms and conditions in ways that could limit, eliminate, or otherwise interfere with our ability to
use Apple IDs, Google usernames, or Facebook profiles as a registration method or to allow these entities to use such data to gain a competitive advantage. If Apple, Google, or Facebook did so, our business, financial condition, and results of
operations could be materially adversely affected. Additionally, if security on Apple, Google, or Facebook is compromised, if our users are locked out from their accounts, or if Apple, Google, or Facebook experiences an outage, our users may be
unable to access our products and services. If our ability to distribute our products and services to our users is impaired, even if for a temporary period, user growth and engagement on our service could be materially adversely affected, even if
for a temporary period. Any of these events could materially adversely affect our business, financial condition, and results of operations.
Privacy concerns relating to our products and
services and the use of user information could negatively impact our user base or user engagement, which could have a material and adverse effect on our business, financial condition, and results of operations.
We collect user profile, precise user location, and other personal
data from our users to provide them with our products and services and to better facilitate connections among our users. As discussed above, despite the increased level of social acceptance of the LGBTQ community, identification as LGBTQ remains
stigmatized, marginalized, and deemed illegal in certain parts of the world. Grindr embraces all sexual orientations and gender identities, including those who identify expressly as straight, gay, bi+ (i.e., those open to multiple genders like
pansexual, polysexual, queer, fluid, and flexible), transexual, lesbian, demisexual, among others. However, certain of our existing and potential users may prefer not to associate with our platform publicly, not to identify themselves publicly as
LGBTQ, not to have assumptions or perceptions formed about their sexual orientation or gender identity, and/or not to have their sexual orientations and gender identities known by others in the LGBTQ community.
While we will endeavor to monitor adverse legal developments
globally, including legislative action and restrictive regulatory interpretations related to the processing of personal data, including special categories of personal data which we collect and process, and attempt to comply with these legal
developments, we may in the
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future be subject to more stringent obligations or claims under such adverse
legislation or regulatory interpretations, which can materially impact our ability to provide our services in certain locales with restrictive data privacy regulatory frameworks.
In addition, although our products and services aim to create an
environment inclusive of all people (both within and outside of the LGBTQ community), our potential users may be reluctant to use our products and services out of fear of the ramifications of being associated with our platform or identified or
perceived as a potential member of the LGBTQ community. Concerns about being identified or perceived in a certain way, as well as concerns about the collection, use, disclosure, or security of personal information or chat history or other
privacy-related matters, even if unfounded, could damage our reputation and discourage potential users from choosing our platform, all of which may adversely affect our business, financial condition, and results of operations. See “—Adverse social and political environments for the LGBTQ community in certain parts of the world, including actions by governments or other groups, could limit our geographic reach, business expansion, and user
growth, any of which could materially and adversely affect our business, financial condition, and results of operation.”
Any incidents where our users’ information is accessed without
authorization, or is improperly used, or incidents that otherwise violate our policies or do not comply with applicable laws and best practices, could damage our reputation and diminish our competitive position. Affected users or government
authorities could initiate legal or regulatory actions against us over these incidents, which could cause us to incur significant expense and liability or result in orders or consent decrees forcing us to modify our business practices. In
addition, our advertising and other business partners also have varying expectations and demands with respect to data privacy and protection measures and practices, and our failure to fully meet such expectations or demands may cause our
advertising or other business partners to take adverse actions, including without limitation suspension, termination, or other unexpected changes in the business relationship which may materially and adversely affect our financial condition,
business outlook, or reputation. Our success depends, in part, on our ability to access, collect, and use personal data about our users and to comply with applicable privacy and data protection laws and industry best practices. See “—Risks Related to Regulation and Litigation—Our success depends, in part, on our ability to access, collect, and use personal data about our users and to comply with applicable privacy and data protection laws and
industry best practices.”
In addition, from time to time, we receive requests or demands for
information from law enforcement agencies that seek access to our user content. In some cases, these requests or demands seek information that we are not able to provide or have determined it is not appropriate to provide due to technical
limitations, privacy concerns, or retention practices. Maintaining the trust of our users is important to sustain our user growth, retention, and engagement. Concerns over our privacy practices, whether actual or unfounded, could damage our
reputation and brand and deter users, advertisers, and partners from using our products and services, any of which may adversely affect our business, financial condition, and results of operations.
We rely primarily on the Apple App Store and
Google Play Store as the channels for processing of payments. In addition, access to our products and services depends on mobile App stores and other third parties such as data center service providers, as well as third-party payment aggregators,
computer systems, internet transit providers and other communications systems and service providers. Any deterioration in our relationship with Apple, Google or other such third parties may negatively impact our business.
Our products and services mainly depend on mobile App stores and the
continued services and performance of other third parties such as data center service providers, third party payment aggregators, computer systems, internet transit providers, and other communications systems and service providers. We primarily
make our Grindr App available to users through, and therefore largely depend upon, the Apple App Store and the Google Play Store. While our Grindr App is generally free to download from these stores, we offer our users the opportunity to purchase
subscriptions and premium add-ons. We determine the prices for these subscriptions and premium add-ons, but at this time, they are primarily processed through the in-App payment systems provided by Apple and Google. We also utilize Stripe in
order to process payments related to certain legacy subscriptions. Apple and Google, as well as other third parties such as Stripe, have broad discretion to make changes to their operating systems or payment services or change the manner in which
their mobile operating systems function and their respective terms and conditions applicable to the distribution of our Grindr App, including the amount of, and requirement to pay, certain fees associated with purchases required to be facilitated
by such third parties through our Grindr App, and to interpret their respective terms and conditions in ways that may limit, eliminate, or otherwise interfere with our products and services, our ability to distribute our Grindr App through their
stores, our ability to update our Grindr App, including to make bug fixes or other feature updates or upgrades, the features we provide, the manner in which we market our
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in-App products and services, our ability to access native functionality or other
aspects of mobile devices, and our ability to access information about our users that they collect.
To the extent such third parties do so, our business, financial
condition, and results of operations could be materially adversely affected. For example, our business could suffer materially if Apple or Google, including other third parties, albeit to a lesser extent, change their standard terms and
conditions, interpretations, or other policies and practices in a way that is detrimental to us or if they determine that we are in violation of their standard terms and conditions and prohibit us from distributing our Grindr App on their
platforms.
There can be no assurance that Apple or Google, or any other similar
third party, will not limit, delay, eliminate, or otherwise interfere with the distribution of our Grindr App, or that we will not be limited or prohibited from using certain current or prospective distribution or marketing channels in the
future. For example, either Apple or Google could block or delay the distribution of a new version of our platform or our products and services based upon alleged non-compliance with their policies concerning safety or in-App content, technical
performance, or design, among other issues. In addition, Google could immediately terminate our Google Play distribution agreement if we experience a change of control, which would have a material adverse effect on our business. If Apple or
Google took any such actions, or if we experience a deterioration in either relationship, our business, financial condition, and results of operations could be materially adversely affected.
Apple recently announced that it would allow app developers to
process payments for subscriptions and other premium add-ons outside of Apple’s payment system. However, there can be no assurance that we will be successful in our effort to process payments outside of Apple’s payment systems.
In addition, we rely on a wide array of additional third parties in
various other aspects of our operations, including software developers, computing, storage, and bandwidth service providers, suppliers of technology infrastructures, mobile application optimization and analytics firms, sales and marketing
channels, contract engineers, contract content contributors, as well as LGBTQ rights advocacy organizations around the world. Any deterioration in our relationships with these third-party suppliers, vendors, and business partners, or any adverse
change in the terms and conditions governing these relationships, could have a negative impact on our business, financial condition, and results of operations.
Our user growth, engagement, and monetization
on mobile devices depend upon effective operation with mobile operating systems, networks, and standards that we do not control.
To deliver a high-quality user experience, our products and services
must work well across a range of mobile operating systems, networks, technologies, mobile devices, and standards that we do not control. We may not be successful in developing relationships with key participants in the mobile industry or in
developing services that operate effectively with these mobile operating systems, handset manufacturers, networks, mobiles devices, mobile carriers, and standards. In addition, any future changes to mobile operating systems, networks, mobile
devices, mobile carriers, or standards may impact the accessibility, speed, functionality, and other performance aspects of our products and services. These issues may, and likely will, occur in the future from time to time. If users experience
issues accessing or using our products and services, particularly on their mobile devices, or if our users choose not to access or use our products and services on their mobile devices, our user growth, retention, and engagement could be harmed,
and our business, financial condition, and results of operation could be adversely affected.
As discussed above, we market, distribute, and make our products and
services available across several mobile operating systems and devices (e.g., iOS and Android) and through a number of third-party publishers and distribution channels (e.g., the Apple App Store and Google Play Store). There can be no guarantee
that popular mobile devices will continue to feature our products and services, or that mobile device users will continue to use our products and services over competing products and services. In addition, if the number of platforms for which we
develop our products and services increases, our costs and expenses will also increase, as will the risks of bugs, outages, or other technical issues. Moreover, our products and services require high-bandwidth data capabilities. If the costs of
data usage increase, our user growth, retention, and engagement may be seriously harmed.
Adverse social and political environments for
the LGBTQ community in certain parts of the world, including actions by governments or other groups, could limit our geographic reach, business expansion, and user growth, any of which could materially and adversely affect our business, financial
condition, and results of operation.
While there has been substantial progress in the protection of LGBTQ
rights in certain parts of the world, identification as LGBTQ remains stigmatized, marginalized, and deemed illegal in many parts of the world. We have
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faced and may continue to face incidents in which government authorities in certain
countries use our products and services to entrap and arrest LGBTQ individuals under charges of “promoting sexual deviancy” and “inciting immorality,” among others.
In addition, some countries, including Pakistan and the Crimean
Peninsula in Ukraine, have banned our products and services and the products and services of other companies in the industry that provide services for and promote the LGBTQ community. Access to our Grindr App in other countries, such as China,
Turkey, Lebanon, Indonesia, the United Arab Emirates, Saudi Arabia, and Qatar, may only be available through the use of services such as virtual private networks, or VPNs, or via home wireless networks, thereby decreasing accessibility to our
products and services. Adverse social and political environments for the LGBTQ community in anti-LGBTQ countries could limit our geographical reach, business expansion, and user growth, any of which could materially and adversely affect our
business, financial condition, and results of operation.
In addition, government authorities in various countries may seek to
restrict user access to our products and services, if they consider us to be in violation of their laws, a threat to public safety, or for other reasons, including if they consider the content on our products and services to be immoral or
indecent. In the event that content shown on our products and services is subject to censorship, access to our products and services may be restricted (in whole or in part) in one or more countries, we may be required to or elect to make changes
to our operations or other restrictions may be imposed on our products and services. If our competitors are able to successfully penetrate new geographic markets or capture a greater share of existing geographic markets that we cannot access or
where we face other restrictions, our ability to retain, expand, and engage our user base and qualify advertisers may be adversely affected, we may not be able to maintain or grow our revenue as anticipated, and our business, financial condition,
and results of operations could be materially adversely affected.
Our success depends on the demographics of the
community that we serve and our ability to foresee and respond to changing market and user demands.
Our success depends heavily upon a variety of factors specific to
the adult LGBTQ community that we serve. Changes in the population size, gender distribution, disposable income, and other demographic characteristics of the global LGBTQ community could have a significant impact on demand for our products and
services and our attractiveness to advertisers who pay to reach our user base.
In addition, changes in the demographic characteristics of the LGBTQ
community could result in shifts in its members’ demands and preferences. The significant diversity within the adult LGBTQ global population further imposes challenges for us to successfully foresee and respond to the changing preferences and
interests of this community. Should we fail to adequately foresee and respond to the demands and preferences of the markets we serve, our business, financial condition, and results of operations would be materially and adversely affected.
Our growth and monetization strategies may not
be successfully implemented or generate sustainable revenue and profit.
To sustain our revenue growth, we must effectively monetize our user
base and expand the monetization of our products and services. Our growth and monetization strategies are constantly evolving. We plan to offer our users more types of subscription packages, additional offers to encourage conversion to premium
(fee-based) subscriptions, and stand-alone for-pay features, among other strategies. In addition, we intend to diversify our advertiser portfolio and strengthen the performance of our online self-service advertising system. However, these efforts
might not be successful and may not justify our investment, or we may not be able to pursue them at all. We have limited and may continue to limit the user data shared with third-party advertising partners, which could have a negative effect on
our ability to maximize our advertising revenue. In addition, we are continuously seeking to balance the growth objectives and monetization strategies with our desire to provide an optimal user experience, and we may not be successful in
achieving a balance that continues to retain and attract users. If our growth and monetization strategies do not generate sustainable revenue, our business, financial condition, and results of operations could be materially adversely affected.
Our product development, investment, and other
business decisions may not prioritize short-term financial results and may not produce the long-term benefits that we expect.
We frequently make product development and investment decisions that
may not prioritize short-term financial results, if we believe that the decisions benefit the aggregate user experience and will thereby improve our financial performance over the long term. For example, we launched our Grindr 4 Equality
initiative to better serve the
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LGBTQ community and strengthen our brand image without focusing on immediate
financial returns. Likewise, we occasionally launch features that we cannot monetize (and may never be able to monetize), but those features aim to improve the overall user experience and thus improve our long-term financial performance by
driving user engagement and retention, among other potential effects. However, these sorts of decisions may not produce the long-term benefits that we expect, in which case our user growth and engagement, our relationships with partners and
advertisers, and our business, financial conditions, and results of operations could be materially adversely affected.
The failure to attract new advertisers, the
loss of existing advertisers, a deterioration in any of our advertising relationships, or a reduction in their spending could adversely harm our business.
We currently generate a material portion of our revenue from
advertising on our products and services, which is included under our Indirect Revenue. We attract third-party advertisers because of our extensive LGBTQ user base worldwide, among other factors. Any decrease or a slower growth in our user base
or user engagement may discourage new or existing advertisers from advertising on our products and services. The advertisers control their respective development and operation, and we have little input, if any at all, on how their platforms
operate. In addition, we largely do not have control over the type of advertisers or the content of their advertisements on our platform. Any deterioration in our relationship with these platforms, any changes in how they operate their platforms
or in the requirements regarding the content on our platform, or any deterioration in the platforms’ relationships with advertisers that advertise on our platform may materially adversely affect our advertising revenue. Any loss of existing
advertisers or failure to attract new advertisers will materially adversely affect our business, financial condition, and results of operations.
Our advertisers typically do not have long-term advertising
commitments with us. The majority of our advertisers spend only a relatively small portion of their overall advertising budget with us. In addition, certain advertisers may view some of our products and services as controversial, experimental or
unproven. Advertisers will not continue to do business with us, or they will reduce the prices they are willing to pay to advertise with us, if we do not deliver ads and other commercial content in an effective manner, or if they do not believe
that their investment in advertising with us will generate a competitive return relative to other alternatives. Moreover, we rely on the ability to collect and disclose data and metrics for our advertisers to attract new advertisers and retain
existing advertisers. Any restriction, whether by law, regulation, policy, or any other reason, on our ability to collect and disclose data to our advertisers would impede our ability to attract and retain advertisers. Our ability to collect and
disclose data may also be adversely affected by third-parties, such as third-party publishers and platforms. See “—The distribution, marketing of, and access to our products and services depend, in large part, on
third-party platforms and mobile application stores, among other third-party providers. If these third parties limit, prohibit, or otherwise interfere with the distribution or use of our products and services in any material way, it could
materially adversely affect our business, financial condition, and results of operations.”
In addition, we believe that our advertising revenue could also be
adversely affected by many factors both within and beyond our control, including:
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decreases in monthly active users and user growth and engagement, including time spent on our products and services;
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decreased user access to and engagement with us through our mobile products and services;
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the degree to which our users cease or reduce the number of times they engage with ads placed through our products and
services;
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changes in our demographics that make us less attractive to advertisers;
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product changes or inventory management decisions that we make that reduce the size, frequency, or prominence of ads and other
commercial content displayed on our products and services;
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our inability to improve our analytics and measurement solutions that demonstrate the value of our ads and other commercial
content;
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loss of advertising market share to our competitors;
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adverse legal developments relating to advertising, including legislative action, regulatory developments, and litigation;
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competitive developments or advertiser perception of the value of our products and services that change the rates we can charge
for advertising or the volume of advertising on our products and services;
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adverse media reports or other negative publicity involving us or other companies in our industry;
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our inability to create new products and services that sustain or increase the value of our ads and other commercial content;
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changes in the pricing of online advertising;
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difficulty and frustration from advertisers who may need to reformat or change their advertisements to comply with our
guidelines;
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the impact of new technologies that could block or obscure the display of our ads and other commercial content; and
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the impact of macroeconomic conditions and conditions in the advertising industry in general.
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The occurrence of any of these or other factors could result in a
reduction in demand for our ads and other commercial content, which may reduce the prices we receive for our ads and other commercial content, or cause advertisers to stop advertising with us altogether, any of which could negatively affect our
business, financial condition, and results of operation.
We may not be able to charge subscription fees
or premium add-on fees at a sufficient level or raise these fees.
We currently offer two premium (fee-based) subscription versions of
our platform, Grindr Xtra and Grindr Unlimited, each of which offers a wide range of premium services to subscribers through additional features. Subscribers can choose different subscription packages for different periods, with deeper discounts
typically being offered to subscribers who select longer subscription periods. In addition, we at times offer users the option to purchase certain premium add-ons, such as one-day day pass memberships to our premium subscription versions of the
platform, among other premium add-on offers. Given the increasing market competition that we face, the constantly changing user demands and preferences that we must address, and the uncertainties in the overall economic environment, we may not be
able to charge fees at a sufficient level or raise fees, especially in emerging markets.
In addition, our pricing strategies may fail to gain acceptance
among users or compete effectively against our competitors, especially in emerging markets where we have less of an operating history. Moreover, we may be unable to convert our users from our free products and services to our subscription-based
products and services at a sufficient rate, or at all. In any of these events, our business, financial condition, and results of operations could be materially adversely affected.
We have significant internationally sourced
revenue and plan to expand our operations abroad in markets in which we have more limited operating experience. As a result, we may face additional risks in connection with certain of our international operations that could adversely affect our
financial results.
We have significant internationally sourced revenue and plan to
continue the international expansion of our business, including through the translation of our products and services. As of September 30, 2022, we distribute the iOS and Android versions of our Grindr App in 9 and 21 languages, respectively, and
had registered users in most countries and territories in which the Apple App Store and Google Play Store operate (except Cuba, China, Iran, Sudan and Ukraine). Our international revenues represented 38.3%, 37.5%, 35.8%, 42.7%, and 36.7% of total
revenue for the three and nine months ended September 30, 2022, the year ended December 31, 2021, combined Successor 2020 Period and Predecessor 2020 Period (each as defined below), and the year ended December 31, 2019, respectively.
We may enter new international markets and expand our operations in
existing international markets, where we have limited or no experience in marketing, selling, and deploying our products and services. In addition, some or all of our products or services may not be permitted or made available in certain markets
due to legal and regulatory complexities and different societal perceptions of LGBTQ identities. See “—Adverse social and political environments for the LGBTQ community in certain parts of the world, including
actions by governments or other groups, could limit our geographic reach, business expansion, and user growth, any of which could materially and adversely affect our business, financial condition, and results of operation.” If we fail to
deploy, manage, or oversee our international expansion successfully, our business may suffer.
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In addition, we believe that operating internationally,
particularly in countries in which we have more limited experience, exposes us to a number of additional risks both within and beyond our control, including:
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operational and compliance challenges caused by distance, language, and cultural differences;
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political tensions, social unrests, or economic instability, particularly in the countries in which we operate;
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differing levels of social and technological acceptance of our products and services, or lack of acceptance of them generally;
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low usage and/or penetration of internet-connected consumer electronic devices;
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risks related to the legal and regulatory environment in foreign jurisdictions, including with respect to privacy, data
security and unexpected changes in laws, regulatory requirements, and enforcement;
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potential damage to our brand and reputation due to compliance with local laws, including potential censorship or requirements
to provide user information to local authorities;
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our lack of a critical mass of users in certain markets;
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fluctuations in currency exchange rates;
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higher levels of credit risk and payment fraud;
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enhanced difficulties of integrating any foreign acquisitions;
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burdens of complying with a variety of foreign laws, including multiple tax jurisdictions;
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competitive environments that favor local businesses;
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reduced protection for intellectual property rights in some countries;
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difficulties in staffing and managing global operations and the increased travel, infrastructure, and legal compliance costs
associated with multiple international locations;
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regulations that might add difficulties in repatriating cash earned outside the U.S. and otherwise preventing us from freely
moving cash;
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import and export restrictions and changes in trade regulations;
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political unrest, terrorism, military conflict (such as the conflict involving Russia and Ukraine), war, health and safety
epidemics (such as the COVID-19 pandemic and the 2022 mpox outbreak) or the threat of any of these events;
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export controls and economic sanctions administered by the U.S. Department of Commerce Bureau of Industry and Security and the
U.S. Department of the Treasury Office of Foreign Assets Control and similar regulatory entities in other jurisdictions;
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compliance with the U.S. Foreign Corrupt Practices Act, the U.K. Bribery Act, and similar anti-corruption laws in other
jurisdictions; and
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compliance with statutory equity requirements and management of tax consequences.
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Moreover, geopolitical tensions in or involving countries in which
we operate, such as Russia, may prevent us from operating in certain countries or increase our costs of operating in those countries. See “—A downturn in the global economy, especially in the United States and
Europe, where a substantial majority of our revenue is generated could adversely harm our business.” In addition, if enforcement authorities demand access to our user data, our failure to comply could lead to our inability to operate in
such countries or other punitive acts. For example, in 2018, Russia blocked access to the messaging app Telegram after it refused to provide access to the Russian government to encrypted messages.
The occurrence of any of these or other factors or our failure to
effectively manage the complexity of our global operations could materially adversely affect our international operations, which could, in turn, negatively affect our business, financial condition, and results of operations.
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Our business and results of operations may
be materially adversely affected by the recent COVID-19 pandemic, the 2022 mpox outbreak, or other similar outbreaks.
Our business could be materially adversely affected by the outbreak
of a widespread health epidemic or pandemic, including the recent COVID-19 pandemic and newly declared public health emergencies such as the 2022 mpox outbreak. The COVID-19 pandemic has reached across the globe, resulting in the implementation
of significant governmental measures, including lockdowns, closures, quarantines, and travel bans intended to control the spread of the virus. While some of these measures have been relaxed over the past few months in various parts of the world,
ongoing social distancing measures, and future prevention and mitigation measures, as well as the potential for some of these measures to be reinstituted in the event of repeat waves of the virus, are likely to have an adverse impact on global
economic conditions and consumer confidence and spending, and could materially adversely affect demand, or our users’ ability to pay, for our products and services. The 2022 mpox outbreak has spread to many regions of the world, including to
regions where we conduct our business operations. We have seen slower active user growth in areas with significant mpox outbreaks. If the mpox outbreak continue to spread, any resulting fluctuation in our user base and user activity may have a
material and adversely affect our business operations and financial results.
A public health epidemic, pandemic or public health emergency,
including COVID-19 and 2022 mpox outbreak, poses the risk that we or our employees, contractors, vendors, and other business partners may be prevented or impaired from conducting ordinary course business activities for an indefinite period,
including due to shutdowns necessitated for the health and well-being of our employees, the employees of business partners, or shutdowns that may be requested or mandated by governmental authorities. In addition, in response to the COVID-19
pandemic, we have taken several precautions that may adversely impact employee productivity, such as moving to a remote-first work environment, imposing travel restrictions within the U.S. and internationally, and temporarily closing office
locations.
A widespread epidemic, pandemic, or other health crisis could also
cause significant volatility in global markets. The COVID-19 pandemic has caused disruption in financial markets, which if it continues or intensifies, could reduce our ability to access capital and thereby negatively impact our liquidity.
We have in the past experienced, and may in the future experience
volatility in our user and revenue growth rates as a result of the COVID-19 pandemic and the 2022 mpox outbreak. We intend to continue to execute on our strategic plans and operational initiatives; however, the uncertainties may result in delays
or modifications to these plans and initiatives. Part of our growth strategy includes increasing the number of international users and expanding into additional geographies. The timing and success of our international expansion may be negatively
impacted by COVID-19, the 2022 mpox outbreak or other disease outbreaks, which could impede our anticipated growth. As we experience volatility or decline in growth rates, investors’ perceptions of our business may be adversely affected, and the
trading price of our shares of common stock may decline.
The ultimate extent of the impact of any epidemic, pandemic, or
other health crisis on our business will depend on multiple factors that are highly uncertain and cannot be predicted, including its severity, location and duration, and actions taken to contain or prevent further its spread. In addition, the
COVID-19 pandemic and the 2022 mpox outbreak could increase the magnitude of many of the other risks described in this prospectus and may have other material adverse effects on Our operations that we are not currently able to predict. If our
business and the markets in which it operates experience a prolonged occurrence of adverse public health conditions, such as COVID-19, the 2022 mpox outbreak and other similar outbreaks, it could materially adversely affect our business,
financial condition, and results of operations.
The forecasts and projections herein are based
upon certain assumptions, analyses, and estimates. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, our actual results may differ materially from those forecasted or projected.
The forecasts and projections, including projected revenue growth,
Adjusted EBITDA Margin and the anticipated market opportunity, growth and penetration, are subject to significant uncertainty and are based on certain assumptions, analyses and estimates, including with reference to third-party forecasts, any or
all of which may prove to be incorrect or inaccurate. These include assumptions, analyses and estimates about future pricing and future costs, all of which are subject to a wide variety of business, regulatory and competitive risks and
uncertainties. If these assumptions, analyses or estimates prove to be incorrect or inaccurate, our actual results may differ materially from those forecasted or projected, adversely affecting the value of Common Stock.
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We depend on our key personnel and we may
not be able to operate or grow our business effectively if we lose the services of any of our key personnel or are unable to attract qualified personnel in the future.
We currently depend on the continued services and performance of our
key personnel, including members of senior management, product development and revenue teams, engineering personnel, and privacy and information security employees, among other key staff. In addition, some of our key technologies and systems have
been, or may be in the future, custom-made for our business by our key personnel. If one or more of our senior management or other key employees cannot or chose not to continue their employment with us, we might not be able to replace them
easily, in a timely manner, or at all. In addition, the risk that competitors or other companies may poach our talent increases as we continue to build our brand and become more well-known. Our key personnel likely have been, and may continue to
be, subject to poaching efforts by our competitors and other internet and high-growth companies, including well-capitalized players in the social media and consumer internet space. The loss of key personnel, including members of management,
product development and revenue teams, engineering personnel, and privacy and information security employees, could disrupt our operations and have a material adverse effect on our business, financial condition, and results of operations.
Our future success will depend upon our continued ability to
identify, hire, develop, motivate, and retain highly skilled individuals across the globe, with the continued contributions of our senior management being especially critical to our success. We face intense competition in the industry for
well-qualified, highly skilled employees and our continued ability to compete effectively depends, in part, upon our ability to attract and retain new employees. While we have established programs to attract new employees and provide incentives
to retain existing employees, particularly our senior management, we cannot guarantee that we will be able to attract new employees or retain the services of our senior management or any other key employees in the future. Additionally, we believe
that our culture and core values have been, and will continue to be, a key contributor to our success and our ability to foster the innovation, creativity, and teamwork that we believe we need to support our operations. If we fail to effectively
manage our hiring needs and successfully integrate our new hires, or if we fail to effectively manage remote work arrangements resulting from the COVID-19 pandemic, among other factors, our efficiency and ability to meet our forecasts and our
ability to maintain our culture, employee morale, productivity, and retention could suffer, and our business, financial condition, and results of operations could be materially adversely affected.
Finally, effective succession planning will be important to our
future success. If we fail to ensure the effective transfer of senior management knowledge and to create smooth transitions involving senior management across our various businesses, our ability to execute short and long term strategic,
financial, and operating goals, as well as our business, financial condition, and results of operations generally, could be materially adversely affected.
We have limited insurance coverage with respect
to our business and operations.
Although we maintain property insurance, professional liability
insurance, technology error and omission/cyber liability insurance, and commercial general liability insurance, we cannot assure you that our insurance coverage will be sufficient or that future coverage will be available at reasonable costs.
Accordingly, we may determine that we cannot obtain insurance on acceptable terms or at all. However, we have in the past, and may in the future, experience issues obtaining cyber insurance that provides third-party reimbursement or obtaining
such insurance on favorable terms.
In addition, our business disruption insurance covers only loss of
business income sustained due to direct physical loss or damage to property on our premises, and insurance policies covering damage to our IT infrastructure or information technology systems are limited. Any disruptions to our IT infrastructures
or systems or an uncovered business disruption event could result in substantial cost to us and diversion of our resources.
Problems with any insurer, or the general limitations of our
insurance policies, including any applicable retentions or caps, could result in limited coverage for us and cause us to incur significant operating expenses. Additionally, if a significant loss, judgment, claim or other event is not covered by
insurance, the loss and related expenses could harm our business, financial condition and results of operations. The occurrence of any of these or other factors could negatively affect our business, financial condition, and results of operations.
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We rely on certain key operating metrics
that have not been independently verified to manage our business, we may periodically change our metrics, and real or perceived inaccuracies in such metrics may harm our reputation and negatively affect our business.
We regularly review metrics, such as MAUs, to evaluate growth
trends, measure our performance, and make strategic decisions. The MAUs are calculated using unique devices that demonstrate activity on our Grindr App on a calendar month basis and the devices counted may not exactly correlate to the number of
users of our Grindr App. The MAUs are also calculated using internal company data gathered on analytics platforms that we developed or deployed and operate, and they have not been validated by an independent third party. In addition, our internal
systems measure MAUs by detecting user activity when users open our Grindr App on their devices, regardless of whether the users engage in any further activities using the application, and therefore these metrics cannot measure the extent to
which our users use our products and services, or accurately estimate the impact that it may have on our financial results. See “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Key Operating and Financial Metrics” for more details. While these metrics are based on what we believe to be reasonable estimates of our user base for the applicable periods, there are inherent challenges in measuring how our
products and services are used across large populations globally and in accounting for spam accounts (as opposed to genuine users). Our user metrics are also affected by technology on certain mobile devices that automatically runs in the
background of our Grindr App when another phone function is used, and this activity can cause our system to miscount the user metrics associated with such an account. The methodologies used to measure these metrics require significant judgment
and are also susceptible to algorithm or other technical errors. In addition, we are continually seeking to improve our estimates of our user base, and such estimates may change due to improvements or changes in our methodology.
Errors or inaccuracies in our metrics or data could also result in
incorrect business decisions and inefficiencies. For instance, if a significant understatement or overstatement of MAUs were to occur, we may expend resources to implement unnecessary business measures or fail to take required actions to attract
a sufficient number of users to satisfy our growth strategies. We continually seek to address technical issues in our ability to record such data and improve our accuracy, but given the complexity of the systems involved, the rapidly changing
nature of mobile devices and systems, how our platform manages identity, and the way our users use the Grindr App, we expect these issues to continue. We are currently exploring and developing an alternative identifier in an effort to capture
different use cases on our platform, such as when a user logs into their account from multiple devices or when users periodically uninstall and then reinstall our Grindr App. This identifier may not be applicable retroactively to historical data.
This technology is still nascent, and it may be some time before we determine the resultant data is reliable or useful. To the extent we switch to reporting MAU data in the future based on this alternative identifier, it may be difficult for
investors to evaluate period over period comparisons of these metrics. We may periodically change the metrics we use for internal or external reporting purposes. If advertisers, partners, or investors do not perceive our user, geographic, or
other demographic metrics to be accurate representations of our user base, or if we discover material inaccuracies in our user, geographic, or other demographic metrics, our reputation may be seriously harmed. If customers, platform partners, or
investors do not perceive our user, geographic, or other demographic metrics to be accurate representations of our user base or user engagement, or if we discover material inaccuracies in our user, geographic, or other demographic metrics, our
reputation may be materially adversely impacted and users, platform partners, and investors may be less willing to allocate their resources or spending to our Grindr App, any of which could materially negatively affect our business, financial
condition, and results of operation.
Foreign currency exchange rate fluctuations could
materially adversely affect our results of operations.
We operate in various international markets. During the three and
nine months ended September 30, 2022, the year ended December 31, 2021, the combined Successor 2020 Period and Predecessor 2020 Period and the year ended December 31, 2019, our international revenue represented 38.3%, 37.5%, 35.8%, 42.7% and
36.7% of our total revenue, respectively. We translate international revenues into U.S. dollar-denominated operating results, and during periods of a strengthening U.S. dollar, our international revenues will be reduced when translated into U.S.
dollars. In addition, as foreign currency exchange rates fluctuate, the translation of our international revenues into U.S. dollar-denominated operating results affects the period-over-period comparability of such results and can result in
foreign currency exchange gains and losses.
We have exposure to foreign currency exchange risk related to
transactions carried out in a currency other than the U.S. dollar, and investments in foreign subsidiaries with a functional currency other than the U.S. dollar.
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Brexit has caused, and may continue to cause, volatility in
currency exchange rates between the U.S. dollar and the British pound, or GBP, and the full impact of Brexit remains uncertain. To the extent that the U.S. dollar strengthens relative to the GBP, the translation of our international revenues into
U.S. dollars will reduce its U.S. dollar denominated operating results and will affect their period-over-period comparability. See “—Risks Related to Regulation and Litigation—Legal, political, and economic
uncertainty surrounding the exit of the United Kingdom from the European Union, or Brexit, and the implementation of the trade and cooperation agreement between the United Kingdom and the European Union could have a material adverse effect on
our business.”
Significant foreign exchange rate fluctuations, in the case of one
currency or collectively with other currencies, could materially adversely affect our business, financial condition, and results of operations.
Risks Related to Information Technology Systems and
Intellectual Property
Security breaches, unauthorized access to or
disclosure of our data or user data, other hacking and phishing attacks on our systems, or other data security incidents could compromise sensitive information related to our business and/or user personal data processed by us or on our behalf and
expose us to liability, which could harm our reputation, generate negative publicity, and materially and adversely affect our business.
Our products and services and the operation of our business involve
the collection, storage, processing, and transmission of data, including personal data regarding our users. The information systems that store and process such data are susceptible to increasing threats of continually evolving cybersecurity
risks. Cyber-attacks by third parties seeking unauthorized access to confidential or sensitive data, including personal data regarding our users, or seeking to disrupt our ability to provide services, have become prevalent in our industry. We may
also face attempts to create false or undesirable user accounts or take other actions for the purposes of spamming, spreading misinformation or other objectionable ends. Given our Grindr App's popularity and user demographics, bad actors may
attempt to target or exploit our systems or users. We face an ever-increasing number of threats to our information systems from a broad range of potential bad actors, including foreign governments, criminals, competitors, computer hackers, cyber
terrorists, and politically or socially motivated groups or individuals, and we have previously experienced various attempts to access our information systems. These threats include physical or electronic break-ins, security breaches from
inadvertent or intentional actions by our employees, contractors, consultants, and/or other third parties with otherwise legitimate access to our systems, website, or facilities, or from cyber-attacks by malicious third parties which could breach
our data security and disrupt our systems. The motivations of such actors may vary, but breaches that compromise our information technology systems can cause interruptions, delays, or operational malfunctions, which, in turn, could have a
material adverse effect on our business, financial condition, and results of operations.
In addition, the risks related to a security breach or disruption,
including through a distributed denial-of-service, or DDoS, attack, computer and mobile malware, worms, viruses, social engineering (predominantly spear phishing attacks), attempts to misappropriate customer information, including credit card
information and account login credentials, and general hacking, have become more prevalent in our industry and these risks have generally increased as the number, intensity, and sophistication of attempted attacks and intrusions from around the
world have increased. Ransomware attacks, including those perpetrated by organized criminal threat actors, nation-states, and nation-state supported actors, are also becoming increasingly prevalent and severe and can lead to significant
interruptions in our operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may alleviate the negative impact of a ransomware attack, but we may be unwilling or unable to make such payments due to, for
example, applicable laws or regulations prohibiting payments.
Security incidents or disruptions have occurred on our systems in
the past, and they will continue to occur in the future and may be inherently difficult to detect for long periods of time. As a result of our market leader position, the size of our user base, and the types and volume of personal data on our
systems, we believe that we are a particularly attractive target for such breaches and attacks, including from highly sophisticated, state-sponsored, or otherwise well-funded actors. Though it is difficult to determine what, if any, harm may
directly result from any specific interruption or attack, any failure to maintain performance, reliability, security, and availability of our products and services and technical infrastructure to the satisfaction of our users may harm our
reputation and our ability to retain existing users and attract new users, as well as generate negative publicity.
Although we have devoted and continue to devote significant
resources to protect our data and user data, we cannot assure you that such measures will provide absolute security and we may also incur significant costs in protecting against or remediating cyberattacks. In addition, some of the user data we
collected is stored in facilities provided by third parties which are beyond our control. Any failure to prevent or mitigate security breaches and
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unauthorized access to or disclosure of our data or user data, including personal
information, content, or payment information from users, or information from marketers, could result in the loss, modification, disclosure, destruction, or other misuse of such data, which could subject us to legal liability, including
investigations by regulatory authorities and/or litigation that could result in liability to third parties, harm our business and reputation, and diminish our competitive position. We may incur significant costs in protecting against or
remediating such incidents and as cybersecurity incidents continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measure or to investigate and remediate any information
security vulnerabilities. Our efforts to protect our confidential and sensitive data, the data of our users or other personal information we receive, and to disable undesirable activities on our platform, may also be unsuccessful due to software
bugs or other technical malfunctions; employee, contractor, or vendor error or malfeasance, including defects or vulnerabilities in our service providers’ information technology systems or offerings; government surveillance; breaches of physical
security of our facilities or technical infrastructure; or other threats that may surface or evolve.
In addition, third parties may attempt to fraudulently induce
employees or users to disclose information to gain access to our data or our users’ data. Although we have developed systems and processes that are designed to protect our data and user data, to prevent data loss, to disable undesirable accounts
and activities on our platform, and to prevent or detect security breaches, we cannot assure you that such measures will be successful, that we will be able to anticipate or detect all cyber-attacks or other breaches, that we will be able to
react to cyber-attacks or other breaches in a timely manner, or that our remediation efforts will be successful. We may also incur significant legal and financial exposure, including legal claims, higher transaction fees, and regulatory fines and
penalties because of any compromise or breach of our systems or data security, or the systems and data security of our third-party providers. Any of the foregoing could have a material adverse effect on our business, financial condition, and
results of operations.
Moreover, supply-chain attacks have increased in frequency and
severity, and we cannot guarantee that third parties and infrastructure in our supply chain have not been compromised or that they do not contain exploitable defects or bugs that could result in a breach of or disruption to our information
technology systems (including our products and services) or the third-party information technology systems that support us and our services. Some of our partners may receive or store information provided by us or by our users through mobile or
web applications integrated with our Grindr App, and we use third-party service providers to store, transmit, and otherwise process certain confidential, sensitive, or personal information on our behalf. If these third parties fail to adopt or
adhere to adequate data security practices, or in the event of a breach of their networks, our data or our users’ data may be improperly accessed, used, or disclosed, which could subject us to legal liability. We cannot control such third parties
and cannot guarantee that a security breach will not occur on their systems. Although we may have contractual protections with our third-party service providers, contractors, and consultants, any actual or perceived security breach could harm our
reputation and brand, expose us to potential liability or require us to expend significant resources on data security and in responding to any such actual or perceived breach. Any contractual protections we may have from our third-party service
providers, contractors, or consultants may not be sufficient to adequately protect us from any such liabilities and losses, and we may be unable to enforce any such contractual protections.
While our insurance policies include liability coverage for certain
of these matters, if we experience a significant security incident, we could be subject to liability or other damages that exceed our insurance coverage and we cannot be certain that such insurance policies will continue to be available to us on
economically reasonable terms, or at all, or that any insurer will not deny coverage as to any future claim. See “—Risks Related to our Brand, Products and Services, and Operations—We have limited insurance
coverage with respect to our business and operations.” The successful assertion of one or more large claims against us that exceed available insurance coverage, or the occurrence of changes in our insurance policies, including premium
increases or the imposition of large deductible or coinsurance requirements, could have a material adverse effect on our business, financial condition, and results of operations.
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
Our success depends, in part, on the integrity
of our information technology systems and infrastructures and on our ability to enhance, expand, and adapt these systems and infrastructures in a timely and cost-effective manner.
Our reputation and ability to attract, retain, and serve users
depends on the reliable performance of our products and services and our underlying technology infrastructure. Our products and services and systems rely on highly
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technical and complex software and hardware, and they depend on the ability of such
software and hardware to store, retrieve, process, and manage immense amounts of data. While we have not experienced any material outages in the recent past, we have in the past experienced performance delays and other glitches, and we expect to
face similar issues in the future. In addition, our systems may not be adequately designed with the necessary reliability and redundancy to avoid performance delays, other glitches, or outages that could make some or all of our systems or data
temporarily unavailable and prevent our products and services from functioning properly for our users. Any such interruption could arise for any number of reasons, including human errors, and could materially and adversely affect our business,
financial condition, and results of operations.
Moreover, our systems and infrastructures are vulnerable to damage
from fire, power loss, hardware and operating software errors, cyber-attacks, technical limitations, telecommunications failures, acts of God, and similar events. While we have back-up systems in place for certain aspects of our operations, not
all of our systems and infrastructures have redundancies or back-up systems. In addition, disaster recovery planning can never account for all possible eventualities and our property and business interruption insurance coverage may not be
adequate to compensate us fully for any losses that we may suffer. Any interruptions or outages, regardless of the cause, could negatively impact our users’ experiences with our products and services, tarnish our reputations and decrease demand
for our products and services, and result in significant negative publicity, any of which could materially adversely affect our business, financial condition, and results of operations. Moreover, even if detected, the resolution of such
interruptions may take a long time, during which customers may not be able to access, or may have limited access to, our products and services.
We also continually work to expand and enhance the efficiency and
scalability of our technology and network systems to improve the experience of our users, accommodate substantial increases in the volume of traffic to our various products and services, ensure acceptable load times for our products and services,
and keep up with changes in technology and user preferences. Any failure to do so in a timely and cost-effective manner could materially adversely affect our users’ experience with our various products and services, thereby negatively impacting
the demand for our products and services, and could increase our costs, any of which could materially adversely affect our business, financial condition, and results of operations.
If the security of personal and confidential
or sensitive user information that we maintain and store is breached, or otherwise accessed by unauthorized persons, it may be costly to remediate such breach, it may generate negative publicity, and our reputation could be harmed.
We receive, process, store, and transmit a significant amount of
personal information regarding our users and other confidential or sensitive information, including user-to-user communications, and personal information of our employees and users, and enable our users to share their personal information,
including some which may be interpreted as special or sensitive information under certain privacy and data protection regulations, with each other through their public Grindr profiles or private in-App messages. In some cases, we engage
third-party service providers to store this information. We continuously develop and maintain systems to protect the security, integrity, and confidentiality of this information, but we have experienced past incidents of inadvertent or
unauthorized use or disclosure of such information. See “—Risks Related to our Brand, Products and Services, and Operations—Unfavorable media coverage could materially and adversely affect our business, brand, or
reputation.” In addition, we may in the future experience additional incidents of inadvertent or unauthorized use or disclosure of information, or third parties may gain unauthorized access to information despite our efforts. When such
incidents occur, we may not be able to remedy them, we may be required by law to notify regulators and individuals whose personal information was used or disclosed without authorization, we may be subject to claims against us, including
government enforcement actions or investigations, fines and litigation, we may be subject to negative publicity, and we may have to expend significant capital and other resources to mitigate the impact of such events, including developing and
implementing protections to prevent future events of this nature from occurring. When breaches of our or our third-party service providers’ and partners’ information technology systems occur or unauthorized access to any of the confidential,
sensitive, or other personal information that we collect or process occurs, the perception of the effectiveness of our security measures, the security measures of our partners, and our reputation may be harmed, we may lose current and potential
users and the recognition of our brand and our brand’s competitive positions may be diminished, any of which could materially adversely affect our business, financial condition, and results of operations.
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
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We are subject to risks related to credit
card payments, including data security breaches and fraud that we or third parties experience or additional regulation, any of which could materially adversely affect our business, financial condition, and results of operations.
In addition to purchases through the Apple App Store and the Google
Play Store, we accept payment from our users through certain other online payment service providers, and we expect to explore and implement additional payment mechanisms based in part upon Apple’s recent announcement that it would allow app
developers to process payments for subscriptions and other premium add-ons outside of Apple’s payment system. See “—Risks Related to our Brand, Products and Services, and Operations—We rely primarily on the Apple
App Store and Google Play Store as the channels for processing of payments. In addition, access to our products and services depends on mobile app stores and other third parties such as data center service providers, as well as third party
payment aggregators, computer systems, internet transit providers and other communications systems and service providers. Any deterioration in our relationship with Apple, Google either of them or other such third parties may negatively impact
our business.” The ability to process credit card information or other account charges on a real-time basis without having to proactively reach out to the consumer each time we process an auto-renewal payment or a payment for the
purchase of a premium feature on any of our products and services will be critical to our success and to a seamless experience for our users. When we or a third party experiences a data security breach involving credit card information, affected
cardholders will often cancel their credit cards. In the case of a breach experienced by a third party, the more sizable the third party’s customer base and the greater the number of credit card accounts impacted, the more likely it is that our
users would be impacted by such a breach. To the extent our users are ever affected by such a breach experienced by us or a third party, affected users would need to be contacted to obtain new credit card information and process any pending
transactions. It is likely that we would not be able to reach all affected users, and even if we could, some users’ new credit card information may not be obtained and some pending transactions may not be processed, which could materially
adversely affect our business, financial condition, and results of operations.
In addition, even if our users are not directly impacted by a given
data security breach, they may lose confidence in the ability of service providers to protect their personal information generally, which could cause them to stop using their credit cards online and choose alternative payment methods that are not
as convenient for us or restrict our ability to process payments without significant cost or user effort.
Moreover, if we fail to adequately prevent fraudulent credit card
transactions, we may face litigation, fines, governmental enforcement action, civil liability, diminished public perception of our security measures, significantly higher credit card-related costs and substantial remediation costs, or refusal by
credit card processors to continue to process payments on our behalf, any of which could materially adversely affect our business, financial condition, and results of operations.
Finally, the passage or adoption of any legislation or regulation
affecting the ability of service providers to periodically charge consumers for, among other things, recurring subscription payments may materially adversely affect our business, financial condition, and results of operations. For example,
pursuant to the U.K.’s Payment Services Regulations 2017, banks and other payment services providers must develop and implement strong customer authentication protocols by March 14, 2022, to ensure that the person requesting access to an account
or trying to make a payment has the necessary authority and permission. This implementation could materially adversely affect our payment authorization rate and user experience in connection with payments. In addition, many U.S. states are
considering similar legislation or regulation, or changes to existing legislation or regulation governing subscription payments. While we will monitor and attempt to comply with these legal developments, we may in the future be subject to claims
under such legislation or regulation.
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
Our success depends, in part, on the integrity
of third-party systems and infrastructures and on continued and unimpeded access to our products and services on the internet.
We rely on third parties, primarily data center and cloud-based,
hosted web service providers, such as Amazon Web Services, as well as software development services, computer systems, internet transit providers, and other communications systems and service providers, in connection with the provision of our
products and services generally, as well as to facilitate and process certain transactions with our users. See “—Risks Related to our Brand, Products and Services, and Operations—The distribution, marketing of,
and access to our products and services
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depends, in large part, on third-party platforms and mobile
application stores, among other third-party providers. If these third parties limit, prohibit, or otherwise interfere with the distribution or use of our products and services in any material way, it could adversely affect our business, financial
condition, and results of operations.” We have no control over any of these third parties or their operations. While we seek actively reduce risk by trying to minimize reliance on any single third party or our
operations, and by creating back-up systems where possible, we cannot guarantee that third-party providers will not experience system interruptions, outages or delays, or deterioration in the performance.
Problems or insolvency experienced by any of these third-party
providers, the telecommunications network providers with which we or they contract, the systems through which telecommunications providers allocate capacity among their customers, or any other providers or related services, could also materially
and adversely affect us. Any changes in service levels at our data centers or any interruptions, outages, or delays in our systems or those of our third-party providers, or deterioration in the performance of these systems, could impair our
ability to provide our products and services or process transactions with our users, which could materially adversely impact our business, financial condition, and results of operations. In addition, if we need to migrate our business to
different third-party providers because of any such problems or insolvency, it could impact our ability to retain our existing users or add new users, among other materially adverse effects. See “—Risks Related
to our Brand, Products and Services, and Operations—If we fail to retain existing users or add new users, or if our users decrease their level of engagement with our products and services or do not convert to paying users, our revenue,
financial results, and business may be significantly harmed.”
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
Our products and services and internal
systems rely on highly technical software and, if it contains undetected errors or vulnerabilities, we could be subject to liability and our business could be materially adversely affected.
As explained above, our products and services and internal systems
rely on highly technical and complex software, including software developed or maintained internally and/or by third parties. In addition, our products and services and internal systems depend on the ability of such software to store, retrieve,
process, and manage immense amounts of data. The software on which we rely has contained, and may now and in the future contain, undetected errors, bugs, or vulnerabilities. Some errors may only be discovered after the code has been released for
external or internal use and can manifest in any number of ways in our products and services, including through diminished performance, security vulnerabilities, malfunctions, or even permanently disabled products and services. Errors, bugs,
vulnerabilities, or other defects within the software on which we rely have in the past, and may in the future, result in a negative experience for users and marketers who use our products and services, delay product introductions or
enhancements, result in targeting, measurement, or billing errors, compromise our ability to protect the data of our users and/or our intellectual property, result in negative publicity, or lead to reductions in our ability to provide some or all
of our services. In addition, any errors, bugs, vulnerabilities, or defects discovered in the software on which we rely, and any associated degradations or interruptions of service, could result in damage to our reputation, loss of users, loss of
revenue, or liability for damages, any of which could adversely affect our business, financial condition, and results of operations.
We could also face claims for product liability, tort, breach of
warranty, or other causes of action. Although our Terms and Conditions of Service contain provisions relating to warranty disclaimers and liability limitations, among other provisions our Terms and Conditions of Service or, these contractual
terms may not be upheld or enforceable in all jurisdictions in which we distribute our products and services, and they may not offer us any protections from liability in potential legal action. In addition, defending a lawsuit, regardless of its
merit, is costly and may divert management’s attention and seriously harm our reputation and our business. Moreover, if our liability insurance coverage proves inadequate or future coverage is unavailable on acceptable terms or at all, our
business could be adversely affected. See “—Risks Related to our Brand, Products and Services, and Operations—We have limited insurance coverage with respect to our business and operations.”
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
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From time to time, we are party to
intellectual property-related litigations and proceedings that are expensive and time consuming to defend, and, if resolved adversely, could materially adversely impact our business, financial condition, and results of operations.
We may become party to disputes from time to time over rights and
obligations concerning our intellectual property or intellectual property held by third parties, and we may not prevail in these disputes. Companies on the internet, technology, and social media industries are frequently involved in litigation
based upon allegations of infringement of intellectual property rights, unfair competition, invasion of privacy, defamation, and other violations of other parties’ rights. Many companies in these industries, including many of our competitors,
have substantially larger intellectual property portfolios than we do (and substantially more resources), which could make us a target for litigation as we may not be able to assert counterclaims against parties that sue us for infringement,
misappropriation, or other violations of patent or other intellectual property rights. In addition, various “non-practicing entities” that own patents and other intellectual property rights often attempt to assert claims to extract value from
technology companies. Given that these patent holding companies or other adverse intellectual property rights holders typically have no relevant product revenue, our own issued or pending patents and other intellectual property rights may provide
little or no deterrence to these rights holders in bringing intellectual property rights claims against us. From time to time we receive claims from third parties which allege that we have infringed upon their intellectual property rights, and we
have also been a party to several patent infringement litigations from such third parties. Further, from time to time we may introduce new products and services, product features and services, including in areas where we currently do not have an
offering, which could increase our exposure to patent and other intellectual property claims from competitors and non-practicing entities. In addition, some of our agreements with third-party partners require us to indemnify them for certain
intellectual property claims asserted against them, which could require us to incur considerable costs in defending such claims and may require us to pay significant damages in the event of an adverse ruling. Such third-party partners may also
discontinue their relationships with us because of injunctions or otherwise, which could result in loss of revenue and adversely impact our business operations.
In addition, although we try to ensure that our employees and
consultants do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or our employees or consultants have inadvertently or otherwise used or disclosed intellectual property, including
trade secrets, software code or other proprietary information, of a former employer or other third parties. Litigation may be necessary to defend against these claims and, if we fail in defending any such claims, in addition to paying monetary
damages, we may lose valuable intellectual property rights or personnel. Furthermore, although we generally require our employees and contractors who may be involved in the conception or development of intellectual property to execute agreements
assigning such intellectual property to us, we may be unsuccessful in executing such an agreement with each party who, in fact, conceives or develops intellectual property that we regard as our own. Moreover, any such assignment of intellectual
property rights may not be self-executing, the assignment agreements may be breached or the agreements may not effectively assign ownership of relevant intellectual property rights to us, and we may be forced to bring claims against third
parties, or defend claims that they may bring against us, to determine the ownership of what we regard as our intellectual property.
As we face increasing competition and develop new products and
services, we expect the number of patent and other intellectual property claims against us may grow. There may be intellectual property or other rights held by others, including issued or pending patents, that cover significant aspects of our
products and services, and we cannot be sure that we are not infringing or violating, and have not infringed or violated, any third-party intellectual property rights or that we will not be held to have done so or be accused of doing so in the
future.
Any litigation of this nature, regardless of outcome or merit, could
result in substantial costs and diversion of management and technical resources. Some of our competitors have substantially greater resources than we do and can sustain the costs of complex intellectual property litigation to a greater degree and
for longer periods of time than we could. The outcome of any litigation is inherently uncertain, and there can be no assurances that favorable final outcomes will be obtained in all cases. In addition, third parties may seek, and we may become
subject to, preliminary or provisional rulings during any such litigation, including potential preliminary injunctions requiring us to cease some or all of our operations. We may decide to settle such lawsuits and disputes on terms that are
unfavorable to us or that require us to make material changes to our business. Similarly, if any litigation to which we are a party is resolved adversely, we may be subject to an unfavorable judgment that may not be reversed upon appeal,
including being subject to a permanent injunction and being required to pay substantial monetary damages, including treble damages and attorneys’ fees, if we are found to have willfully infringed a party’s intellectual property rights. The terms
of such a settlement or judgment may require us to cease some or all of our operations or pay substantial
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amounts to the other party. In addition, we may have to seek a license to continue
practices found to be in violation of a third-party’s rights. If we are required or choose to enter into royalty or licensing arrangements, such arrangements may not be available on reasonable terms, or at all, and may significantly increase our
operating costs and expenses. Such arrangements may also only be available on a non-exclusive basis such that third parties, including our competitors, could have access to the same licensed technology to compete with us. As a result, we may also
be required to develop or procure alternative non-infringing technology, which could require significant effort, time and expense or discontinue use of the technology or practices, which could negatively affect the user experience or may not be
feasible. There also can be no assurance that we would be able to develop or license suitable alternative technology to permit us to continue offering the affected products or services. If we cannot develop or license alternative technology for
any allegedly infringing aspect of our business, we would be forced to limit our products and services and may be unable to compete effectively. Furthermore, because of the substantial amount of discovery required in connection with intellectual
property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Any of the foregoing, and any unfavorable resolution of such disputes and litigation, would
materially and adversely impact our business, financial condition, and results of operations.
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
We may fail to adequately protect our
intellectual property rights or to prevent third parties from making unauthorized use of such rights, and our registered intellectual property is subject to challenge.
Our intellectual property is a material asset of our business, and
our success depends in part on our ability to protect our proprietary rights and intellectual property. For example, we heavily rely upon our trademarks, designs, copyrights, and related domain names, social media handles, and logos to market our
brand and to build and maintain brand loyalty and recognition. We rely upon patented and patent-pending proprietary technologies and trade secrets, as well as a combination of laws, and contractual restrictions, including confidentiality
agreements with employees, customers, users, suppliers, affiliates, and others, to establish, protect, and enforce our various intellectual property rights. For example, we have generally registered and continue to apply to register and renew, or
secure by contract where appropriate, trademarks and service marks as they are developed and used, and reserve, register, and renew domain names and social media handles as we deem appropriate. If our trademarks and trade names are not adequately
protected, then we may not be able to build and maintain name recognition in our markets of interest and our business may be adversely affected. In addition, effective intellectual property protection may not be available or may not be sought in
every country in which our products and services are made available, or in every class of goods and services in which we operate, and contractual disputes may affect the use of marks governed by private contract. Our registered or unregistered
trademarks or trade names may be challenged, infringed, circumvented, declared generic, or determined to be infringing on other marks. Our competitors may also adopt trade names or trademarks like ours, thereby impeding our ability to build brand
identity and possibly leading to market confusion. Similarly, not every variation of a domain name or social media handle may be available or be registered by us, even if available. The occurrence of any of these events could result in the
erosion of our brand and limit our ability to market our brand using our various domain names and social media handles, as well as impede our ability to effectively compete against competitors with similar technologies or products and services,
any of which could materially adversely affect our business, financial condition, and results of operations.
We cannot guarantee that our efforts to obtain and maintain
intellectual property rights are adequate, that we have secured, or will be able to secure, appropriate permissions or protections for all of the intellectual property rights we use or rely on. Even in cases where we seek intellectual property
registration or other protections, there is no assurance that the resulting registration, issuance or other protection will effectively protect every significant feature of our products and services. Moreover, even if we can obtain intellectual
property rights, any challenge to our intellectual property rights could result in them being narrowed in scope or declared invalid or unenforceable. In addition, third parties may also knowingly or unknowingly infringe our proprietary rights,
third parties may challenge proprietary rights held by us, and pending and future trademark and patent applications may not be approved. Other parties may also independently develop technologies that are substantially similar or superior to ours
and we may not be able to stop such parties from using such independently developed technologies from competing with us. These circumstances make it challenging for us to protect our intellectual property rights and may materially adversely
impact our business.
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In addition, our intellectual property rights and the enforcement
or defense of such rights may be affected by developments or uncertainty in laws and regulations relating to intellectual property rights. Moreover, many companies have encountered, and may in the future encounter, significant problems in
protecting and defending intellectual property rights in foreign jurisdictions, particularly in emerging markets. The legal systems of some foreign jurisdictions may not favor the enforcement of patents, trade secrets, and other intellectual
property protection, which could make it difficult for us to stop the infringement, misappropriation, or other violation of our intellectual property or marketing of competing products and services in violation of our intellectual property rights
generally.
We also may be forced to bring claims against third parties to
determine the ownership of what we regard as our intellectual property or to enforce our intellectual property against infringement, misappropriation, or other violations by third parties. However, the measures we take to protect our intellectual
property from unauthorized use by others may not be effective and there can be no assurance that our intellectual property rights will be sufficient to protect against others offering products or services that are substantially similar or
superior to ours and that compete with our business. We may not prevail in any intellectual property-related proceedings that we initiate against third parties. In addition, in any such proceedings or in proceedings before patent, trademark, and
copyright agencies, our asserted intellectual property could be found to be invalid or unenforceable, in which case we could lose valuable intellectual property rights. Moreover, even if we are successful in enforcing our intellectual property
against third parties, the damages or other remedies awarded, if any, may not be commercially meaningful. Regardless of whether any such proceedings are resolved in our favor, such proceedings could cause us to incur significant expenses and
could disrupt our business and distract our personnel from their normal responsibilities. Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from
the intellectual property that we develop or license.
In addition, despite any measures we take to protect our
intellectual property, our intellectual property rights may still not be protected in a meaningful manner, challenges to contractual rights could arise, or third parties could copy or otherwise obtain and use our intellectual property without
authorization. The occurrence of any of these events could result in the erosion of our brand and limit our ability to market our products and services using our intellectual property, as well as impede our ability to effectively compete against
competitors with similar technologies, any of which could adversely affect our business, financial condition, and results of operations. The occurrence of any of these or other factors could negatively affect our business, financial condition,
and results of operations.
We have obtained certain patents that are material to the operation
of our applications, e.g., our patent titled “Systems and methods for providing location-based cascading displays” (the “Cascade Patent”). However, we cannot offer any assurances that the Cascade Patent or
any other patent we may obtain in the future may be found valid or enforceable if challenged or otherwise threatened by third parties. Any successful opposition to these patents or any other patents owned by or, if applicable in the future,
licensed to us could deprive us of rights necessary for the successful commercialization of products and services that we may develop. Since patent applications in the United States and most other countries are confidential for a period of time
after filing (in most cases 18 months after the filing of the priority application), we cannot be certain that we were the first to file on the technologies covered in several of the patent applications related to our technologies or products and
services. Furthermore, a derivation proceeding can be provoked by a third party, or instituted by the United States Patent and Trademark Office (“USPTO”), to determine who was the first to invent any of the
subject matter covered by the patent claims of our applications.
Patent law can be highly uncertain and involve complex legal and
factual questions for which important principles remain unresolved. In the United States and in many international jurisdictions, policy regarding the breadth of claims allowed in patents can be inconsistent and/or unclear. The United States
Supreme Court and the Court of Appeals for the Federal Circuit have made, and will likely continue to make, changes in how the patent laws of the United States are interpreted. Similarly, international courts and governments have made, and will
continue to make, changes in how the patent laws in their respective countries are interpreted. We cannot predict future changes in the interpretation of patent laws by United States and international judicial bodies or changes to patent laws
that might be enacted into law by United States and international legislative bodies.
Moreover, in the United States, the Leahy-Smith America Invents Act,
or the Leahy-Smith Act, enacted in September 2011, brought significant changes to the United States patent system, including a change from a “first to invent” system to a “first to file” system. Other changes in the Leahy-Smith Act affect the way
patent applications are prosecuted, redefine prior art and may affect patent litigation. The USPTO developed new regulations and
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procedures to govern administration of the Leahy-Smith Act, and many of the
substantive changes to patent law associated with the Leahy-Smith Act became effective on March 16, 2013. The Leahy-Smith Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications
and the enforcement or defense of our issued patents, which could have a material adverse effect on our business and financial condition.
Our use of “open-source” software could
subject our proprietary software to general release, adversely affect our ability to sell our products and services, and subject us to possible legal action.
From time to time, we make software source code and other technology
we develop available for licensing under open-source licenses. In addition, we or third parties include open-source software in connection with a portion of our products and services and, and we expect to continue to use open-source software in
the future. Open-source software is generally licensed by its authors or other third parties under open-source licenses. From time to time, companies that use third-party open-source software have faced claims challenging the use of such
open-source software and requesting compliance with the open-source software license terms.
Furthermore, from time to time, we may face claims from others
challenging our use of open-source software, claiming ownership of, or seeking to enforce the license terms applicable to such open-source software, including by demanding release of the open-source software, derivative works, or the proprietary
source code that we have developed using such software. We may also be subject to suits by parties claiming ownership of what we believe to be open-source software or claiming non-compliance with the applicable open-source licensing terms. These
claims could result in litigation and could require us to make our software source code freely available, seek licenses from third parties to continue offering our products and services for certain uses, or cease offering the products and
services associated with the open-source software unless and until we can re-engineer them to avoid infringement, any of which may materially adversely affect our business, financial condition, and results of operations. In addition, if the
license terms for the open-source code change, we may be forced to re-engineer our software or incur additional costs, which could be very costly. Moreover, the terms of many open-source licenses to which we are subject have not been interpreted
by U.S. or foreign courts. Accordingly, we face a risk that open-source software licenses could be construed in a manner that imposes unanticipated conditions or restrictions on our ability to market or provide our products and services.
In addition, the use of third-party open-source software typically
exposes us to greater risks than the use of third-party commercial software because open-source licensors generally do not provide warranties or controls on the functionality or origin of the software. Use of open-source software may also present
additional security risks because the public availability of such software may make it easier for hackers and other third parties to determine how to compromise our platform.
The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
If the use of third-party cookies or other
tracking technology is rejected by our users, restricted by third parties outside of our control, or otherwise subject to unfavorable regulation, our performance could be negatively impacted and we could incur revenue loss.
We employ a number of technologies that collect information about
our users. For instance, we use third-party Software Development Kits (“SDKs”) within our Grindr App. SDKs are industry-standard technology which allows app developers to develop applications for specific
platforms. SDKs also allow app developers to enhance app functionality and offer features such as advertising, account creation via third-party platforms (e.g., Login with Google), and user analytics. Similar to SDKs on our mobile app, we utilize
small text files, commonly referred to as “cookies,” placed through a browser on a user’s machine which corresponds to a data set that we keep on our servers, to gather relevant data when users visit our website. Our cookies collect personal
information regarding to the user’s visits and experiences, such as location-based information about the user’s device through the use of our cookies and other tracking technologies. We use these technologies to provide a more seamless user
experience and collect, aggregate and/or detect and prevent irregular or fraudulent activities. However, users may delete or block cookies in their internet browsers, and users can decline consent for certain non-essential SDKs via our mobile
consent management platform (“CMP”). In addition, companies such as Google have disclosed their intention to move away from third-party cookies to another form of persistent unique identifier, or ID, to
identify individual internet users or internet-connected devices. If our cookies cannot function as designed or companies do not use
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shared IDs across the entire ecosystem, then our ability to recognize, record or
track users could be negatively affected, which may reduce the effectiveness of our services and marketing efforts.
We may also experience challenges in obtaining appropriate consent
to our use of cookies from users, which may adversely affect our operations and business. In addition, we may not be able to develop or implement additional tools that compensate for the lack of data associated with cookies. Even if we are able
to do so, such additional tools may be subject to further regulation, time consuming to develop or costly to obtain, and less effective than the current use of cookies, which may, in turn, materially and adversely affect our business, results of
operations and financial condition.
Risks Related to Regulation and Litigation
We have identified material weaknesses in our
internal control over financial reporting which, if not corrected, could affect the reliability of our consolidated financial statements, and have other adverse consequences.
In connection with the audits of our consolidated financial
statements for the years ended December 31, 2021, 2020, and 2019, and continuing into 2022 material weaknesses in our internal control over financial reporting were identified in relation to (i) the appropriateness and sufficiency of management’s
review controls for unusual and nonrecurring transactions, (ii) the appropriateness and sufficiency of management’s review controls around the underlying data and bookings reporting from the mobile application platforms upon which we rely in
order to record direct revenue, a currently manual process, and (iii) as a result of the above, the accuracy and timeliness of our financial statement closing process. A material weakness is a deficiency or combination of deficiencies in internal
control over financial reporting such that there is a reasonable possibility that a material misstatement of our consolidated financial statements would not be prevented or detected on a timely basis.
The identified material weaknesses could result in a material
misstatement to our consolidated financial statements that may not be prevented or detected. Given that we operated as a private company prior to the Business Combination, we did not have the necessary formalized processes to effectively
implement review controls within our internal control over financial reporting.
We have implemented the following actions to remediate the material
weaknesses described above. These remediation measures are ongoing and include the following:
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hiring additional technical personnel to bolster our accounting capabilities and capacity, including the evaluation of
technical and reporting accounting materials;
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designing and implementing an automatic intake process with respect to direct revenue information from third parties, engaging
tax consultants to regularly review changes in tax requirements in applicable jurisdictions for appropriate tax assessment, and conducting monthly review processes to enhance direct revenue information accuracy;
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designing and implementing appropriate modules in our financial systems to automate manual reconciliations and calculations;
and
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evaluating, designing and implementing the internal controls and procedures with respect to the closing process, including the
measures stated above, to limit human judgment errors, enhance adequacy of reviews to assure timely and accurate financial control.
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We believe all the remediation efforts taken as a whole will result
in comprehensive financial reporting reviews and a reduction in manual processes to ensure a timely close and accurate financial reporting. However, we cannot assure you the measures we are taking to remediate the material weakness will be
sufficient or that they will prevent future material weaknesses. Additional material weaknesses or failure to maintain effective internal control over financial reporting could cause us to fail to meet our reporting obligations as a public
company and may result in a restatement of our financial statements for prior periods.
If not remediated, these material weaknesses could result in further
material misstatements to our annual or interim consolidated financial statements that might not be prevented or detected on a timely basis, or in delayed filing of required periodic reports. If we are unable to assert that our internal control
over financial reporting is effective, or when required in the future after the Closing, if our Independent Registered Public Accounting Firm is unable to express an unqualified opinion as to the effectiveness of the internal control over
financial reporting,
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investors may lose confidence in the accuracy and completeness of our financial
reports, the market price of the stock could be adversely affected, and we could become subject to litigation or investigations by the NYSE, the SEC, or other regulatory authorities, which could require additional financial and management
resources.
Our success depends, in part, on our ability
to access, collect, and use personal data about our users and to comply with applicable privacy and data protection laws and industry best practices.
We and other companies in the industry have been criticized by
consumer protection groups, privacy groups, governmental bodies, and other individuals and entities for certain data practices or for perceptions about data practices. Increased attention to or regulation of data utilization practices, including
self-regulation or findings under existing laws that limit our ability to collect, transfer, and use information and other data, could have a material adverse effect on our business, financial condition, and results of operation. In addition, if
we or our third-party vendors were to disclose data about our users in an objectionable manner, if we or our third-party vendors are perceived to have disclosed data about our users in an objectionable manner, or if we or our third-party vendors
fail to comply with applicable privacy and data protection laws and industry best practices, our business reputation could be materially adversely affected. We may receive negative publicity, and we could face potential legal claims or regulatory
investigations that could impact our operating results. We and/or our third-party vendors have in the past been subject to such matters and we expect to face similar issues in the future.
In addition, we may become subject to additional and/or more
stringent legal obligations concerning our treatment of user data and other personal information, such as laws regarding data collection, localization and/or restrictions on data transfers, particularly internationally. Recent legal developments
in Europe have created complexity and uncertainty regarding transfers of personal data subject to the GDPR and UK GDPR to organizations established in third countries, including the U.S.
European data protection legislation, including the GDPR and the
United Kingdom’s GDPR (i.e., the GDPR as it continues to form part of the law of the United Kingdom after its withdrawal from the European Union, by virtue of section 3 of the EU (Withdrawal) Act 2018 and as subsequently amended) (“U.K. GDPR”)), generally restricts the transfer of personal information from Europe, including the European Economic Area, United Kingdom. and Switzerland, to the United States and most other countries unless
the parties to the transfer have implemented specific safeguards to protect the transferred personal information. One of the primary safeguards allowing U.S. organizations to import personal information from the EEA and the United Kingdom, as in
the case of certain data collection by us, has been certification to the EU-U.S. Privacy Shield frameworks administered by the U.S. Department of Commerce. However, in July 2020, the Court of Justice of the European Union (“CJEU”) issued a decision invalidating the EU-U.S. Privacy Shield framework. The same decision also raised questions about whether one of the primary alternatives to the EU-U.S. Privacy Shield, namely, the
European Commission’s Standard Contractual Clauses (“SCCs”), can lawfully be used for personal information transfers from the EEA to the United States or most other countries. The Court states that
controllers or processors, acting as exporters, are responsible for verifying, on a case-by-case basis and, where appropriate, in collaboration with the importer in the third country, if the law or practice of the third country impinges on the
effectiveness of the appropriate safeguards offered by the data transfer tool. In those cases, the Court still leaves open the possibility for exporters to implement supplementary measures that fill these gaps in the protection and bring it up to
the level required by European data protection legislation. The Court does not specify which measures these could be. However, the Court underlines that exporters will need to identify them on a case-by-case basis.
To align with the CJEU’s decision in respect of the E.U.-U.S.
Privacy Shield, on September 8, 2020, the United Kingdom’s government similarly invalidated the use of the EU-U.S. Privacy Shield as a mechanism for lawful personal data transfers from the United Kingdom to the U.S. under the UK GDPR and the
Swiss Federal Data Protection and Information Commissioner announced that the Swiss-U.S. Privacy Shield regime was also inadequate for the purposes of personal data transfers from Switzerland to the U.S. entities who had self-certified under the
Swiss Privacy Shield.
On June 4, 2021, the European Commission adopted new SCCs, which
impose additional obligations on companies relating to data transfers, including the obligation to conduct a transfer impact assessment (TIA) and depending on a party’s role in the transfer, to implement additional security measures and to update
internal privacy practices. The United Kingdom has also adopted the international data transfer agreement (IDTA), the international data transfer addendum to the European Commission’s SCCs (Addendum) and a document setting out transitional
provisions, which came into force on March 21, 2022. The IDTA and Addendum replaced the SCCs as a transfer tool to comply with Article 46 of the UK GDPR when making restricted transfers from the United Kingdom.
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Where we elect to rely on the SCCs, the IDTA or the Addendum for
data transfers, we may be required to incur significant time and resources to update our contractual arrangements, to perform TIAs and to comply with new obligations. The SCCs, the IDTA or the Addendum may increase the legal risks and liabilities
associated with cross-border data transfers, and result in material increased compliance and operational costs. At present, there are few, if any, viable alternatives to the SCCs, the IDTA or the Addendum, which are mechanisms on which we have
relied for onward transfers of personal information from the EEA and the United Kingdom to third countries. If we are unable to implement a valid solution for personal information transfers from the EEA and the United Kingdom, we may face
increased exposure to regulatory actions, substantial fines, and injunctions against processing or transferring personal information from the EEA and the United Kingdom to third countries, and we may be required to increase our data processing
capabilities in multiple jurisdictions at significant expense. Inability to collect personal information from EEA or UK users or to transfer their personal information to the United States or other countries may decrease demand for our products
and services, as some of our users are established in the EEA and the United Kingdom, therefore, they may seek alternatives that do not involve their personal information being processed or transferred out of Europe. Limitations on our ability to
import personal information to the United States and other countries where our key vendors are established may decrease the functionality or effectiveness of our products and services and adversely impact our marketing efforts, plans and
activities. European Union regulators and the UK Information Commissioner’s Office (“ICO”) may aggressively enforce these laws restricting data transfers to the U.S. and other countries without a legally
sound transfer mechanism, and it is possible that European Union regulators and the ICO could prevent us from transferring any personal data out of the European Union or the United Kingdom to certain countries like the U.S. or to our vendors
established in countries not offering an adequate level of protection.
These and related developments may require us to review and amend
the legal mechanisms by which we make and/or receive personal data transfers to/in the United States and other third countries. In particular, we are undertaking a process to enhance its Data Processing Agreement to ensure it complies with the
GDPR and UK GDPR data transfer requirements, which includes the EU SCCs issued by the European Commission and the IDTA and the Addendum issued by the ICO. Furthermore, these and related developments, including the obligation to perform TIAs in
certain scenarios, may oblige us to suspend or prevent us to transfer personal information to third parties if we are unable to implement effective supplementary measures. As supervisory authorities issue further guidance on personal data export
mechanisms, including circumstances where we need to perform a TIA and the SCCs, IDTA or the Addendum may need to be supplemented with additional safeguards, and/or start taking enforcement action, we could suffer additional costs, complaints
and/or regulatory investigations or fines if our compliance efforts are not deemed sufficient with the most recent regulatory guidance on measures regarding supplement transfer tools. In addition, if we are otherwise unable to transfer personal
data between and among countries and regions in which we operate and/or use key vendors, it could affect the manner in which we provide our solutions, the geographical location or segregation of our relevant systems and operations, reduce demand
for our solutions and this could adversely affect our financial results.
In the event any court blocks personal data transfers to or from a
particular jurisdiction, this could give rise to operational interruption in the performance of services for customers, greater costs to implement permissible alternative data transfer mechanisms, regulatory liabilities, or reputational harm and
negative publicity. Failure to comply with the evolving interpretation of privacy and data protection laws could subject us to liability, and to the extent that we need to alter our business model or practices to adapt to these obligations, or to
respond to inquiries regarding our compliance with privacy and data protection laws, we could incur additional and significant expenses, which may in turn materially adversely affect our business, financial condition, and results of operations.
Privacy activist groups have also previously provided, and may
continue to provide, resources to support individuals who wish to pursue privacy claims or put pressure on companies to change data processing practices. High-profile brands such as ours risk being targeted by such groups and, due to the nature
of the data that we hold, there is a risk that, if a user became disgruntled with our data processing practices, they could leverage support from such privacy activist groups to take legal action, cause the initiation of regulatory investigation,
or gain publicity for their cause. There is also a risk that these groups will seek to challenge our practices, particularly in relation to our consent practices, third-party advertising practices, and/or international data transfers, among other
data and privacy practices. Any such campaign could require significant resources to mount a response, it could disrupt our operations or distract management, and it could lead to negative publicity and potential investigation from regulators,
among other negative effects, any of which may materially adversely affect our business, financial condition, and results of operations.
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The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
Investments in our business may be subject to
U.S. foreign investment regulations which may impose conditions on or limit certain investors’ ability to purchase our stock, potentially making the stock less attractive to investors. Our future investments in U.S. companies may also be subject
to U.S. foreign investment regulations.
The Committee on Foreign Investment in the United States (“CFIUS”) is an interagency body of the U.S. government authorized to review certain foreign investment transactions in U.S. businesses (“Covered Transactions”) in order to
determine the effect of such transactions on the national security of the United States. If a Covered Transaction could pose a risk to the national security of the United States, CFIUS can recommend that the President of the United States address
such risks by suspending, prohibiting, or unwinding the transaction. CFIUS could also enter into a negotiated mitigation agreement with the parties to a Covered Transaction in order to address U.S. national security concerns raised by the Covered
Transaction. As widely reported in media coverage, we have previously been the subject of CFIUS scrutiny in connection with a prior Covered Transaction.
Certain Covered Transactions must be notified to CFIUS prior to
closing. For example, a CFIUS notification may be required for Covered Transactions involving U.S. businesses that deal in “critical technology”—a regulatory term covering, among other things, certain technology that is subject to control under
U.S. export control regimes. A CFIUS notification also may be required for Covered Transactions where a foreign government holds a minimum voting interest in a foreign investor that will itself acquire a minimum voting interest in a U.S. company
that deals in certain technology, data, or infrastructure. Failure to make such mandatory filings can subject the transaction parties to civil penalties.
In circumstances where a mandatory filing is not required, parties
to Covered Transactions may choose to submit a voluntary filing to CFIUS. Moreover, where CFIUS perceives that a Covered Transaction poses a potential risk to U.S. national security, CFIUS may unilaterally initiate a review of a Covered
Transaction, or may ask parties to a Covered Transaction to submit a voluntary filing concerning the same.
With respect to any transaction that is subject to CFIUS’
jurisdiction, the parties must determine whether (i) a CFIUS notification is required, (ii) a voluntary notification to CFIUS is advisable, or (iii) consummation of the transaction without a CFIUS notification is permitted and warranted.
Submission of a notification to CFIUS with respect to a transaction related to the Business Combination could result in significant transaction delays, as CFIUS’ review of a Covered Transaction can last between thirty days and several months,
depending on the form of the filing, the complexity of the transaction, the nationality and identity of the parties, and the underlying national security risks associated with the Covered Transaction. CFIUS may condition its approval of a Covered
Transaction on the transaction parties’ agreement to mitigation measures and, in rare cases, the President of the United States could prohibit a pending foreign investment or order divestment of interest post-closing.
In the event CFIUS reviews a Covered Transaction relating to our
business, there can be no assurances that the relevant foreign investor will be able to maintain, or proceed with, participation in the Covered Transaction on terms acceptable to such investor. In connection with its review, CFIUS may, for
example, require limits on information sharing with the investor, modifications to governance agreements, or annual reporting requirements, among other things. Potential restrictions on the ability of foreign persons to invest in us could affect
the price that an investor may be willing to pay for our shares of common stock. In some circumstances, moreover, we may choose not to pursue certain investments or other transactions, which are otherwise attractive, solely or in part based on an
evaluation of the associated CFIUS risks.
The Business Combination remains subject to
review by CFIUS and we are not certain how the outcome of the review will impact the Business Combination or our business.
The obligation of the parties to the Merger Agreement to consummate
the Mergers was subject to obtaining CFIUS Approval (the “CFIUS Approval”). In connection therewith, in August 2022 the parties submitted a voluntary notice to CFIUS pursuant to Section 721 of the Defense
Production Act of 1950, as amended, informing CFIUS of the proposed Business Combination, which triggered a 45-day initial review period. After the initial review period for the joint voluntary notice expired, CFIUS initiated an investigation
period that also lasted 45 days, and which has now also expired. Because the CFIUS review process did not conclude before the parties consummated the Mergers, each party to the Merger Agreement waived the CFIUS Approval. The parties continued to
engage with CFIUS after the closing in order to complete the CFIUS review process. In December 2022, CFIUS informed the parties that CFIUS Approval of the Business
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Combination would be conditioned on the parties entering into a National Security
Agreement (“NSA”). To facilitate negotiation of the NSA, the parties withdrew and re-submitted the CFIUS filing, resulting in a new 45-day initial review period. If the parties are unable to agree to the terms of the NSA with CFIUS within the new
45-day initial review period, CFIUS will initiate an investigation period that will also last up to 45 days. Once the NSA has been executed, the parties will receive CFIUS Approval for the Business Combination (subject to the terms of the NSA).
Once final, the NSA may impose conditions, limitations or restrictions that could negatively impact our operations, limit our ability to engage with certain third parties or to operate in certain markets, impose limits on information sharing with
investors, or require that we make certain commitments regarding our consolidated operations (for example, engage a “security officer” to oversee compliance with the NSA, implement an onerous data security plan, require commitments regarding data
processing or storage, mandate annual reporting to CFIUS Monitoring Agencies, or require ongoing review by CFIUS Monitoring Agencies of vendors retained by us), any of which could increase our estimated costs or otherwise make our shares of
common stock less attractive to investors. The imposition of these limitations, restrictions, or requirements could affect the trading stock price of our securities and/or our ability to pursue strategic goals.
Our business is subject to complex and
evolving U.S. and international laws and regulations. Many of these laws and regulations are subject to change or uncertain interpretation, and could result in claims, changes to our business practices, monetary penalties, increased cost of
operations, declines in user growth or engagement, negative publicity, or other harm to our business.
We are subject to a variety of laws and regulations in the U.S. and
other jurisdictions that involve matters that may impact our business, including broadband internet access, online commerce, advertising, user privacy, data protection, content moderation, intermediary liability, online terms and agreements,
protection of minors, consumer protection, sex trafficking, and taxation, among other areas. The introduction of new products and services, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to
additional laws, regulations, or other scrutiny by governmental agencies and other entities. In addition, foreign laws and regulations can impose different obligations or be more restrictive than those imposed upon us in the U.S., which may harm
our business or subject us to liability.
These U.S. federal, state, and municipal and foreign laws and
regulations, which in some cases can be enforced by private parties in addition to government entities, are constantly evolving and can be subject to significant change. For example, as explained above, FOSTA provides potential civil remedies for
certain victims of online sex trafficking crimes. See “—Risks Related to our Brand, Products and Services, and Operations—Inappropriate actions by certain of our users could be attributed to us and damage our
brand or reputation, or subject us to regulatory inquiries, legal action, or other liabilities, which, in turn, could materially adversely affect our business.” In addition, as explained above, the introduction of new products and
services, expansion of our activities in certain jurisdictions, or other actions that we may take may subject us to additional laws, regulations, or other scrutiny by governmental agencies and other entities. The application, interpretation, and
enforcement of these laws and regulations are often uncertain, particularly in the new and rapidly evolving industry in which we operate. In addition, these laws and regulations may be interpreted and applied inconsistently from state-to-state
and country-to-country, and they may be inconsistent with our current policies and practices. These laws and regulations, as well as any associated inquiries, legal action, investigations, or any other government actions, may be costly to comply
with and may delay or impede the development of new products and services, result in negative publicity, increase our operating costs, require significant management time and attention, and subject us to liability to remedies that may harm our
business, including fines, demands, or orders that we modify or cease existing business practices. For example, a variety of laws and regulations govern the ability of users to cancel subscriptions and auto-payment renewals. Likewise, a variety
of laws and regulations govern the application and enforcement of arbitration clauses and limitations on liability, like those set forth in our Terms and Conditions of Service. We have in the past and may in the future be subject to claims under
a variety of U.S. and international laws and regulations that could materially adversely affect our business, financial condition, and results of operation.
In addition, the promulgation of new laws or regulations, or the new
interpretation of existing laws and regulations, that restrict or otherwise unfavorably impact our business, or our ability to provide our products and services, could require us to change certain aspects of our business and operations to ensure
compliance, which could decrease demand for our products and services, reduce revenues, increase costs, and subject us to additional liabilities. For example, in February 2019, the Secretary of State for Digital, Culture, Media and Sport of the
United Kingdom indicated in public comments that his office intends to inquire as to the measures utilized by online dating platforms to prevent access by underage users. In addition, in April 2019, the United Kingdom published proposed
legislation which would establish a new regulatory body to establish duties of care for internet companies and to
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assess compliance with these duties of care. Under the proposed law, failure to
comply could result in fines, blocking of services, and personal liability for senior management. There have also been calls for legislation to limit or remove the protections afforded technology platforms under the Communications Decency Act in
the United States and under the e-Commerce Directive in the European Union. To the extent this or other initiatives require us to implement any new or more stringent measures, our business, financial condition, and results of operations could be
materially adversely affected.
In addition, concerns about harms and the use of dating products and
services and social networking platforms for such illegal and harmful conduct have produced and could continue to produce future legislation or other governmental action. For example, in January 2020, the Committee on Oversight Subcommittee on
Economic and Consumer Policy of the U.S. House of Representatives launched an investigation into the online dating industry’s user safety policies, including certain of our practices relating to the identification and removal of registered sex
offenders and underage individuals from our platforms. As set forth above, the United Kingdom and European Union have also been considering legislation on this topic, with the United Kingdom having released its Online Harms White Paper which
resulted in the United Kingdom’s Online Safety Bill, and the European Union introducing the Digital Services Act, which in each case, would expose platforms to similar or more expansive liability. See “—Risks
Related to Regulation and Litigation—The varying and rapidly evolving regulatory framework on privacy and data protection across jurisdictions could result in claims, changes to our business practices, monetary penalties, increased cost of
operations, or declines in user growth or engagement, or otherwise harm our business.” Any proposed legislation on these or other topics could expose platforms to liability similar to existing legislation in other jurisdictions or, in
some cases, more expansive liability. For instance, the Digital Services Act proposed in the European Union intends to limit or remove protections afforded to online platforms under the e-Commerce Directive. Likewise, proposed legislation in the
United States, including the EARN IT Act, the PACT Act, the BAD ADS Act, and others, purport to limit or remove the critical protections provided to technology platforms under the Communications Decency Act, which protects technology platforms
from civil liability for certain type of content and actions of the platform’s users. The FCC also is considering a Trump Administration petition to adopt rules limiting the protection available under the Communications Decency Act. There is no
schedule for action by the FCC on the petition, although the Democratic members of the FCC, who now control its agenda, have indicated that they oppose the proposal. In addition, there are pending cases before the judiciary that may result in
changes to the protections afforded to internet platforms, including a lawsuit by former President Trump that, if successful, would greatly limit the scope of the Communications Decency Act protections. If these proposed or similar laws are
passed, if future legislation or governmental action is proposed or taken to address concerns regarding such harms, and if existing protections are limited or removed, changes could be required to our products and services that could restrict or
impose additional costs upon the conduct of our business, subject us to additional liability, or cause users to abandon our products or services, any of which may materially adversely affect our business, financial condition, and results of
operations.
In addition, we depend on the ability of our users to access the
internet. Many users receive internet access from companies that have significant market power in the broadband and internet access marketplace, including incumbent telephone companies, cable companies, mobile communications companies,
government-owned service providers, device manufacturers and operating system providers, any of which could take actions that degrade, disrupt, or increase the cost of user access to our products or services, which would, in turn, negatively
impact our business. The adoption of any laws or regulations that adversely affect access to, or the growth, popularity, or use of, the internet, including laws governing internet neutrality, could decrease the demand for, or the usage of, our
products and services and increase our cost of doing business, which would, in turn, negatively impact our business. For example, the Federal Communications Commission (“FCC”) has, in the past, adopted
“open internet rules” to prohibit mobile providers in the United States from impeding access to most content, or otherwise unfairly discriminating against content providers like us. These rules also prohibited mobile providers from entering into
arrangements with specific content providers for faster or better access over their data networks. While those rules largely were repealed in an order adopted in December 2017, and that order generally was affirmed by a federal appeals court,
petitions for reconsideration of the order remain pending at the FCC, and Democratic control of the Executive Branch, Congress, and the FCC following the 2020 elections increases the likelihood of legislative or FCC action to reverse the 2017
decision or adopt new network neutrality rules. In addition, a number of states have adopted or are adopting or considering legislation or executive actions that would regulate the conduct of broadband providers. The European Union similarly
requires equal access to internet content. If the FCC, Congress, the European Union, or the courts modify these open internet rules, mobile providers may be able to limit our users’ ability to access our products and
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services or make our products and services a less attractive alternative to our
competitors’ products and services. If that occurred, our business would be seriously harmed. Additionally, as part of its Digital Single Market initiative, the European Union may impose network security, disability access, or 911-like
obligations on “over-the-top” services such as those provided by us, which could increase our costs and, in turn, negatively impact our business. Any of these developments may adversely affect our business, financial condition, and results of
operations.
Moreover, the adoption of any laws or regulations that adversely
affect the popularity or growth in use of the internet or our products and services, including laws or regulations that undermine open and neutrally administered internet access, could decrease user demand for our service offerings and increase
our cost of doing business. For example, in December 2017, the FCC adopted an order reversing net neutrality protections in the United States, including the repeal of specific rules against blocking, throttling or “paid prioritization” of content
or services by internet service providers. Numerous parties filed judicial challenges to the order, and on October 1, 2019, the United States Court of Appeals for the District of Columbia Circuit released a decision that rejected nearly all of
the challenges to the new rules, but reversed the FCC’s decision to prohibit all state and local regulation targeted at broadband internet service, requiring case-by-case determinations as to whether state and local regulation conflicts with the
FCC’s rules. The court also required the FCC to reexamine three issues from the order but allowed the order to remain in effect, while the FCC conducted that review. On October 27, 2020, the FCC adopted an order concluding that the three issues
remanded by the court did not provide a basis to alter its conclusions in the 2018 order. Petitions for reconsideration of this decision are pending. Democratic control of the Executive Branch, Congress, and the FCC following the 2020 elections
increases the likelihood of legislative or FCC action to reverse the 2018 decision or adopt new network neutrality rules. In addition, a number of states have adopted or are adopting or considering legislation or executive actions that would
regulate the conduct of broadband providers. A federal court judge denied a request for injunction against California’s state-specific network neutrality law, and as a result, California began enforcing that law on March 25, 2021. On March 10,
2021, trade associations representing internet service providers appealed the district court’s ruling denying the preliminary injunction, and the appeal was denied on January 28, 2022. The trade associations have sought rehearing with the full
court of appeal. Nevertheless, to the extent internet service providers engage in such blocking, throttling or “paid prioritization” of content, or engaged in similar actions because of the reversal of net neutrality protections, our business,
financial condition, and results of operations could be materially adversely affected.
In addition, concerns about various sorts of harms and the use of
similar products and services and social networking platforms for illicit or otherwise inappropriate conduct, such as romance scams and financial fraud, could result in future legislation or other governmental action that affects the overall
social networking industry. For example, in April 2018, the Fight Online Sex Trafficking Act of 2017, or FOSTA, became effective in the U.S. FOSTA created new federal crimes against entities that operate websites that promote or facilitate sex
trafficking, as well as civil remedies for certain victims of online sex trafficking crimes. In addition, FOSTA eliminated any immunity under the Communications Decency Act of 1996 from certain civil claims and state criminal prosecutions. U.S.
legislators have proposed several additional bills that would reduce or eliminate platform liability protections. In addition, the European Union and the United Kingdom have launched consultations aimed at considering potential legislation to
address online harms, and the United Kingdom has released an Online Harms White Paper regarding proposed legislation that would expose platforms to more expansive liability than FOSTA. If these proposed laws are passed, or if future legislation
or governmental action is proposed or taken to address concerns regarding these sorts of harms, changes could be required to our products and services that could restrict or impose additional costs upon our business and/or cause users to abandon
our products and services, and we may be subject to legal action.
In addition, the international nature of our business exposes us to
compliance obligations and related risks under economic sanctions, export controls and anti-corruption laws administered and enforced by various governments. We are subject to rules and regulations of the United States and other jurisdictions
relating to export controls and economic sanctions, including economic sanctions administered by the Office of Foreign Assets Control of the U.S. Department of the Treasury, as well as the Export Administration Regulations administered by the
Bureau of Industry and Security of the U.S. Department of Commerce. Economic sanctions and export controls laws and regulations restrict the ability of persons subject to their jurisdiction to invest in, or otherwise engage in dealings with or
involving, certain individuals, entities, governments or countries (collectively, “Sanction Targets”), including individuals and entities resident, domiciled or incorporated in Cuba, Syria, North Korea, Iran or the Crimea Region, the so-called
Donetsk People’s Republic or Luhansk People’s Republic located in Ukraine, unless such activities are authorized pursuant to regulatory authorizations or general or specific licenses. These regulations may limit our ability to market, sell,
distribute, or otherwise transfer our products and services or technology to certain countries
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or persons. Changes in our products and services and technology or changes in export
controls or economic sanctions laws and regulations may create delays in the introduction of our products and services into international markets or, in some cases, prevent the provision or expansion of our business and our products and services
to or for certain countries, governments or persons altogether.
Pursuant to the applicable economic sanctions and export controls
laws and regulations of the United States and other relevant jurisdictions, we may be obliged to limit business activities, may incur costs in order to implement and maintain compliance programs, and may be subject to investigations, enforcement
actions or penalties relating to actual or alleged instances of noncompliance with such laws and regulations. It may also be necessary for us to take certain actions in order to maintain compliance with, or satisfy obligations under, economic
sanctions and export controls, which could have an adverse effect on the business and results of operation. We maintain policies and procedures that we believe to be adequate and customary to support our compliance with applicable economic
sanctions and export controls. We can provide no assurances, however, that our products and services are not provided inadvertently in violation of such laws, despite the precautions we take.
We are also subject to the U.S. Foreign Corrupt Practices Act of
1977, as amended, (commonly known as the FCPA), the U.S. domestic bribery statute contained in 18 U.S.C. § 201, (commonly known as the U.S. Travel Act), the United Kingdom Bribery Act 2010, (commonly known as the Bribery Act), and other
anti-corruption, anti-bribery, and similar laws in the United States and other countries in which we conduct activities. Anti-corruption and anti-bribery laws generally prohibit companies and their employees, agents, intermediaries and other
third parties from directly or indirectly promising, authorizing, making or offering improper payments or other benefits to government officials and others in the private sector. We may be held liable for the corrupt or other illegal activities
of third-party business partners and intermediaries, or our employees, representatives, contractors, and other third parties, even if we do not explicitly authorize such activities. We maintain policies and procedures that we believe to be
adequate and customary to support our compliance with applicable anti-corruption and anti-bribery laws. However, there can be no assurance that our implementation of such policies and procedures will prevent, at all times, all Grindr employees,
representatives, contractors, partners, agents, intermediaries or other third parties that we engage to interact with government officials or commercial counterparties on its behalf, from taking actions in the future in violation of our polices
or applicable anti-corruption or anti-bribery laws and regulations.
In recent years, U.S. and other governments have increased their
oversight and enforcement activities with respect to these economic sanctions, export controls and anti-corruption laws and regulations and it is expected that the relevant agencies will continue to increase such investigative and enforcement
activities. A violation of these laws or regulations, including through certain dealings with Sanction Targets, could result in severe criminal or civil penalties and reputational harm, which could negatively affect our business, financial
condition, and results of operations.
The varying and rapidly evolving regulatory
framework on privacy and data protection across jurisdictions could result in claims, changes to our business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.
As discussed above, we process a significant volume of personal
information and other regulated information from our users, employees and other third parties. The many countries in which we operate impose numerous laws regarding data security, privacy, and the storage, sharing, use, processing, disclosure,
and protection of this kind of information. In addition, the scope of these laws is constantly changing, and in some cases, they may be inconsistent, conflicting, and subject to differing interpretations, as new laws of this nature are proposed
and adopted. At any time one of the numerous regulators to which we are subject could argue that we are non-compliant with its country’s data protection regulation or that we have not sufficiently operationalized all of our legal obligations with
all such varying laws. In addition, these laws are becoming increasingly rigorous and could be interpreted and applied in ways that may have a material adverse effect on our business, financial condition, and results of operations. We have
experienced enforcement actions related to certain of these laws, we have ongoing enforcement actions related to certain of these laws, and future enforcement actions are likely to continue for the foreseeable future.
In recent years, there has been an increase in attention to and
regulation of data protection and data privacy across the globe, including in the United States, the European Union and the United Kingdom. We are subject to the European Union’s General Data Protection Regulation (“GDPR”), that became effective in May 2018 and the UK GDPR (i.e., the GDPR as it continues to form part of the law of the United Kingdom by virtue of section 3 of the EU (Withdrawal) Act 2018 and subsequently amended); the
California Consumer Privacy Act (“CCPA”), which took effect in January 2020; and the Brazilian General Data Protection Law (“LGPD”), which entered into effect
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in September 2020 and imposes requirements similar to the GDPR on products and
services offered to users in Brazil. LGPD penalties may include fines of up to 2% of the organization’s revenue in Brazil in the previous year or 50 million reais (approximately $9.3 million U.S. dollars). In addition, China’s Personal
Information Protection Law of the P.R.C. (“PIPL”), which became effective in November 2021, has many aspects that are similar to the GDPR. The PIPL sets rules for the processing activities such as
collection, use, sharing, transfer, and disclosure of personal information in China. If we fail to comply with the requirements of the PIPL, we could incur severe penalties, including a fine of up to RMB50 million or 5% of our annual turnover in
the preceding year and revocation of our license to do business in China. Other comprehensive data privacy or data protection laws or regulations have been passed or are under consideration in other jurisdictions, including India and Japan, as
well as various U.S. states. Laws such as these give rise to an increasingly complex set of compliance obligations on us, as well as on many of our service providers. These obligations include, without limitation, imposing restrictions on our
ability to gather personal data, providing individuals with the ability to opt out of personal data collection, imposing obligations on our ability to share data with others, and potentially subject us to fines, lawsuits, and regulatory scrutiny.
The GDPR and the UK GDPR greatly increased the jurisdictional reach
of the European Union and United Kingdom’s laws and added a broad array of requirements related to the handling of personal data. Under the GDPR, European Union member states must enact, and many have enacted, certain implementing legislation
that adds to and/or further interprets the GDPR’s requirements and potentially extends our obligations and potential liability for failing to meet these obligations. The GDPR and the UK GDPR also include obligations and restrictions concerning
the consent and rights of individuals to whom the personal data relates, the transfer of personal data out of the European Economic Area and the United Kingdom, security breach notifications, and the security and confidentiality of personal data
more generally. In addition, individuals have a right to compensation under the GDPR and the UK GDPR for financial or non-financial losses.
Under the GDPR and the UK GDPR we may be subject to fines of up to
€20 million/£17,500,000 or up to 4% of the total worldwide annual group turnover of the preceding financial year (whichever is higher), as well as face claims from individuals based on the GDPR and UK GDPR’s private right of action. The GDPR and
UK GDPR have been, and will continue to be, interpreted respectively by European Union data protection regulators and the ICO, which may require that we make changes to our business practices, which could be time-consuming and expensive, and
could generate additional risks and liabilities.
We are also subject to evolving European Union and United Kingdom
privacy laws on cookies and e-marketing. In the European Union and the United Kingdom, regulators are increasingly focusing on compliance with requirements in the online behavioral advertising ecosystem, and current national laws that implement
the ePrivacy Directive are highly likely to be replaced by an EU regulation known as the ePrivacy Regulation which will significantly increase fines for non-compliance when implemented. In the European Union and the United Kingdom, informed
consent is required for the placement of a cookie or similar technologies on a user’s device and/or for the access to data stored on a user’s device, and for direct electronic marketing. The GDPR and the UK GDPR also impose conditions on
obtaining valid consent, such as a prohibition on pre-checked consents and a requirement to ensure separate consents are sought for each type of cookie or similar technology. While the text of the ePrivacy Regulation is still under development, a
recent European court decision, regulators’ recent guidance and recent campaigns by a not-for-profit organization are driving increased attention to cookies and tracking technologies. If regulators start to enforce the strict approach in recent
guidance, this could lead to substantial costs, require significant systems changes, limit the effectiveness of our marketing activities, divert the attention of our technology personnel, adversely affect our margins, increase costs and subject
us to additional liabilities. Regulation of cookies and similar technologies, and any decline of cookies or similar online tracking technologies as a means to identify and potentially target users, may lead to broader restrictions and impairments
on our marketing and personalization activities and may negatively impact our efforts to understand users. We treat data protection and privacy, compliance seriously. However, to the extent we are determined to be not in compliance with the GDPR,
UK GDPR or e-Privacy legislation, such determination could materially adversely affect our business, financial condition, and results of operations.
Because we do not have a main establishment in the European Union,
we are subject to inquiries from any of the EU data protection regulators. Over the last few years, we have received and responded to inquiries from the Norwegian Data Protection Authority, the Spanish Data Protection Authority, the Slovenian
Data Protection Authority, and the Austrian Data Protection Authority, among other non-EU data protection authorities, including the ICO and various U.S. regulators. For example, in January 2021, the Norwegian Data Protection Authority
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(“Datatilsynet”) notified us of its
preliminary decision that we had disclosed personal data to third parties without a legal basis in violation of Article 6(1) GDPR and that we disclosed special categories of personal data to third parties without a valid exemption from the
prohibition in Article 9(1) GDPR. In addition, Datatilsynet notified us of their preliminary intent to impose an administrative fine for these alleged violations of NOK 100,000,000 (approximately $11,700,300). We responded to the preliminary
decision on March 8, 2021, by contesting the draft findings and the proposed fine. On December 13, 2021, Datatilsynet issued a final administrative fine against us in the reduced amount of NOK 65,000,000 (approximately $7,375,187.30). We
submitted our appeal to the Datatilsynet’s fine and decision on February 14, 2022 and will consider our options as that matter unfolds. Although we are challenging the administrative fine imposed by Datatilsynet, the proceeding has caused us to
incur significant expense, we have been the subject of negative publicity, and the existence of the proceeding has, and may continue to, negatively impact our efforts to retain existing users and add new users and deteriorated our relationships
with advertisers and other third parties. The ultimate outcome of this proceeding may materially adversely affect our business, financial condition, and result of operations.
In addition, Brexit (as defined below) and ongoing developments in
the United Kingdom could result in the application of new data privacy and protection laws and standards to our activities in the United Kingdom and our handling of personal data of users located in the United Kingdom. The relationship between
the United Kingdom and the European Union in relation to certain aspects of data protection law remains unclear, and it is unclear how UK data protection laws and regulations will develop in the medium to longer term, and how data transfers to
the United Kingdom from the EEA will be regulated in the long term. For example, though the European Commission has adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from the EEA to the United Kingdom, the
decision will automatically expire in June 2025 unless the European Commission re-assesses and renews/ extends that decision, and remains under review by the Commission during this period. As a consequence of Brexit, we are exposed to two
parallel regimes (the GDPR and the UK GDPR), each of which potentially authorizes similar, but separate, fines and other potentially divergent enforcement actions for the same alleged violations. Other countries have also passed or are
considering passing laws requiring local data residency and/or restricting the international transfer of data. As set forth above, over the last few years, we have received and responded to inquiries from the ICO.
In addition, multiple legislative proposals concerning privacy and
the protection of user information are being considered by both U.S. state and federal legislatures, and certain U.S. state legislatures, such as California, have already passed and enacted privacy legislation. For example, the CCPA requires
covered companies to provide new disclosures to California consumers (including employees), and provide such consumers new data protection and privacy rights, including the ability to opt-out of certain sales of personal information. In addition,
the CCPA allows for statutory fines for noncompliance (up to $7,500 per violation), as well as a private right of action for certain data breaches that result in the loss of personal information. This private right of action may increase the
likelihood of, and risks associated with, data breach litigation. Moreover, the California Privacy Rights Act of 2020 (“CPRA”), which becomes operative on January 1, 2023 (with a look back for certain
obligations to January 2022), will significantly modify the CCPA. For example, the CPRA will expand consumers’ rights with respect to certain sensitive personal information, among other modifications. The CPRA also creates a new state agency that
will be vested with the authority to implement and enforce the CPRA.
New legislation proposed or enacted in various other U.S. states
imposes or has the potential to impose additional obligations on companies that collect, store, use, retain, disclose, transfer, and otherwise process sensitive and personal information, and will continue to shape the data privacy environment
nationally. For example, Virginia passed its Consumer Data Protection Act, Colorado passed the Colorado Privacy Act, and Utah passed the Utah Consumer Privacy Act, all of which differ from the CPRA and become effective in 2023. State laws are
changing rapidly and there is discussion in Congress of a new federal data protection and privacy law, which if enacted, would be applicable to us. Moreover, governmental agencies like the Consumer Financial Protection Bureau and the Federal
Trade Commission have adopted, or are considering adopting, laws and regulations concerning personal information and data security. For example, the Federal Trade Commission has increased its focus on privacy and data security practices at
digital companies, as evident from its imposition of a $5 billion fine against Facebook for privacy violations and increasing fines against companies found to be in violation of the Children’s Online Privacy Protection Act (“COPPA”).
As discussed above, the myriad, overlapping international and U.S.
privacy and data breach laws are not consistent, and compliance in the event of a widespread data breach is difficult and may be costly. Moreover, states
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have been frequently amending existing laws, requiring constant attention to
ever-changing legal and regulatory requirements. In addition to government regulation, privacy advocates and industry groups have from time to time proposed, and may in the future continue to propose, self-regulatory standards. These and other
industry standards may legally or contractually apply to us, or we may elect to comply with such standards to keep pace with best practices in the industry. We expect that there will continue to be new proposed laws and regulations concerning
data privacy and security, and we cannot yet determine the impact such future laws, regulations, and standards may have on our business. Because the interpretation and application of data protection laws, regulations, standards, and other
obligations are still uncertain, and often contradictory and in flux, it is possible that the scope and requirements of these laws may be interpreted and applied in a manner that is inconsistent with our practices and our efforts to comply with
the evolving data protection rules may be unsuccessful. To the extent we are determined to be not in compliance with any U.S. laws, such determination could materially adversely affect our business, financial condition, and results of operations.
In 2018 and 2019, after media reports regarding our data sharing
practices, multiple State Attorneys General (the “Multistate”) informed us that they had opened investigations into our sharing of user-shared HIV status with two service providers that performed analytics
services and helped us improve the user experience, and into our practices around the security and processing of user geolocation information. Since that time, we have responded to multiple requests for information and discontinued the sharing of
user-shared HIV status. In October 2022, we were advised by the Multistate that the investigation had been closed without action and with no further action anticipated. While this particular investigation concluded in our favor, we may in the
future be the subject of similar types of investigations or proceedings, which could result in substantial costs and a diversion of our management’s attention and resources. Any adverse determination of such investigation or proceeding may
materially adversely affect our business, financial condition, and result of operations, particularly if penalties are levied.
We make public statements about our use and disclosure of personal
information through our Privacy Policy, information provided on our website, and through blog posts and press statements. Although we endeavor to comply with our blog posts, public statements, and documentation regarding our use and disclosure of
personal information, we may at times fail to do so or be alleged to have failed to do so. We may be subject to potential government or legal action if such policies or statements are found to be deceptive, unfair, or misrepresentative of our
actual practices. In addition, from time to time, concerns may be expressed about whether our products and services compromise the privacy of our users and others. Any concerns about our data privacy and security practices (even if unfounded), or
any failure, real or perceived, by us to comply with our posted privacy policies or with any legal or regulatory requirements, standards, certifications or orders, or other privacy or consumer protection-related laws and regulations applicable to
us, could cause our users to reduce or stop their use of our products and services.
While we make great effort to comply with industry standards and
applicable laws and regulations relating to privacy and data protection in all material respects, there can be no assurance that we will not be subject to claims that we have violated applicable laws, regulations, or industry standards, that we
will be able to successfully defend against such claims, or that we will not be subject to significant fines and penalties in the event of a finding of non-compliance with any applicable laws or industry standards. We have been subject to these
types of claims in the past and we may be subject to additional claims in the future. Moreover, if state-level privacy and data protection laws continue to be introduced with inconsistent or conflicting standards and there is no federal law to
preempt such laws, compliance with such laws could be difficult to achieve and noncompliance could lead to fines and penalties in these jurisdictions.
Furthermore, enforcement actions and investigations by regulatory
authorities related to data security incidents and privacy violations continue to increase. We have in the past received, and may continue to receive in the future, inquiries from various international and U.S. regulators regarding our data
privacy practices, some of which remain ongoing. Any failure or perceived failure by us (or the third parties with whom we have contracted to process such information) to comply with applicable privacy and security laws, policies or related
contractual obligations, or any compromise of security that results in unauthorized access, or the use or transmission of, personal user information, could result in a variety of claims against us, including governmental enforcement actions and
investigations, class action privacy litigation in certain jurisdictions, and/or proceedings by data protection authorities, among other potential legal action. We could also be subject to significant fines, other litigation, claims of breach of
contract and indemnity by third parties, and negative publicity. When such events occur, our reputation may be harmed, we may lose current and potential users, the competitive positions of our brand might be diminished, and we could incur
additional costs and expenses, any of which could materially adversely affect our business, financial condition, and
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results of operations. In addition, if our practices are not consistent or viewed as
not consistent with legal and regulatory requirements, including changes in laws, regulations, and standards, or new interpretations or applications of existing laws, regulations, and standards, we may become subject to audits, inquiries,
whistleblower complaints, negative publicity, investigations, loss of export privileges, or severe criminal or civil sanctions, any of which may have a material adverse effect on our business, financial condition, and results of operations.
We are subject to litigation, regulatory and
other government investigations, enforcement actions, and settlements, and adverse outcomes in such proceedings could have a materially adverse effect on our business, financial condition, and results of operation.
We are, have been, and may from time to time become, subject to
litigation and various legal proceedings that involve claims for substantial amounts of money or for other relief that might necessitate changes to our business or operations, including litigation and proceedings related to intellectual property
matters, privacy and consumer protection laws, class action lawsuits, litigation by former employees, legal claims brought by our users, and other matters. In addition, we are, have been, and may from time to time become, subject to
investigations or inquiries from regulators and government entities, both domestically and internationally, regarding our compliance with laws and regulations, many of which are evolving and subject to interpretation. See “—Risks Related to our Brand, Products and Services, and Operations—The varying and rapidly evolving regulatory framework on privacy and data protection across jurisdictions could result in claims, changes to our
business practices, monetary penalties, increased cost of operations, or declines in user growth or engagement, or otherwise harm our business.” As set forth above, we have ongoing regulatory inquiry before Datatilsynet and active civil
litigation in the U.S. and internationally. As we continue to grow and expand our operations, we have been and expect to continue to be the subject of investigations, inquiries, data requests, actions, and audits in the U.S., Europe, or in other
parts of the world, particularly in the areas of privacy, data protection, law enforcement, consumer protection, and competition.
The defense of these actions is time consuming and expensive,
disruptive to our operations, and a distraction for management. We evaluate these litigation claims and legal proceedings to assess the likelihood of unfavorable outcomes and to estimate, if possible, potential losses. Based on these assessments
and estimates, we may establish reserves and/or disclose the relevant litigation claims or legal proceedings, as and when required or appropriate. These assessments and estimates are based on information available to management at the time of
such assessment or estimation and involve a significant amount of judgment. As a result, actual outcomes or losses could differ materially from those envisioned by our current assessments and estimates. Our failure to successfully defend or
settle any of these litigation or legal proceedings could result in liability that, to the extent not covered by our insurance, could have a material adverse effect on our business, financial condition, and results of operations.
We may be held liable for information or
content displayed on, retrieved from, or transmitted over our platform, as well as interactions that result from the use of our platform.
We have faced and may continue to face claims relating to
information or content that is displayed on, retrieved from, or transmitted over our platform by our users or otherwise. In particular, the nature of our business exposes us to claims related to defamation, civil rights infringement, negligence,
copyright or trademark infringement, invasion of privacy, discrimination, and personal injury, among other claims brought by users based upon interactions they have on or off the platform. Such proceedings have, and could cause us to incur
significant expense, become the subject of negative publicity, and negatively impact our efforts to retain existing users or add new users as well as our relationships with advertisers and other third parties.
The risk of these or similar claims is enhanced in certain
jurisdictions outside of the U.S. where our protection from liability for third-party actions may be unclear or nonexistent, where there are decreased legislative protections for the LGBTQ community, and where we may be less protected under local
laws than we are in the U.S. We could incur significant costs in investigating and defending against claims arising from information displayed on, retrieved from, or transmitted over our platform, even if we ultimately are not held liable. If any
of these events occurs, our revenue could be adversely affected, or we could incur significant additional expense, any of which could have a material adverse effect on our business, financial condition, and results of operations.
Activities of our users or content made
available by such users could subject us to liability.
We provide products and services that enable our users to exchange
information and engage in various online activities, so our products and services include substantial user-generated content. For instance, users can provide information in their Grindr App public profiles, share images via their profile and in
messages with other Grindr App
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users and generate audio and video messages. User content or activity may be
infringing, illegal, hostile, offensive, unethical, or inappropriate or may violate our terms of service. We have in the past been, and may be in the future, subject to lawsuits arising from the conduct of our users, or subject to other
regulatory enforcement actions relating to their contents or actions. Even if claims against us are ultimately unsuccessful, defending against such claims will increase our legal expenses and divert management’s attention from the operation of
our business, which could materially and adversely impact our business and results of operations, and our brand, reputation, and financial results may be harmed.
We and other intermediate online service providers rely primarily on
two sets of laws in the U.S. to shield us from legal liability with respect to user activity. The Digital Millennium Copyright Act (“DMCA”), provides service providers a safe harbor from monetary damages
for copyright infringement claims, provided that service providers comply with various requirements designed to stop or discourage infringement on their platforms by their users. Section 230 of the Communications Decency Act (“CDA”), protects providers of an interactive computer service from liability with respect to most types of content provided over their service by others, including users. Both the DMCA safe harbor and Section
230 of the CDA face regular calls for revision, including without limitation in a number of CDA reform bills currently being considered by legislators. Furthermore, recent litigation involving cloud hosting companies has created uncertainty with
respect to the applicability of DMCA protections to companies that host substantial amounts of user content. For these reasons and others, now or in the future, the DMCA, CDA, and similar provisions may be interpreted as not applying to us or may
provide us with incomplete or insufficient protection from claims.
We do not fully monitor the contents or activities of our users, so
inappropriate content may be posted or activities executed before we are able to take protective action, which could subject us to legal liability. Even if we comply with legal obligations to remove or disable content, we may continue to allow
use of our products or services by individuals or entities who others find hostile, offensive, or inappropriate. The activities or content of our users may lead us to experience adverse political, business and reputational consequences,
especially if such use is high profile. Conversely, actions we take in response to the activities of our users, up to and including banning them from using our products, services, or properties, may harm our brand and reputation.
In addition to liability based on our activities in the United
States, we may also be deemed subject to laws in other countries that may not have the same protections or that may impose more onerous obligations on us, which may impose additional liability or expense on us, including additional theories of
intermediary liability. For example, in 2019, the European Union approved a copyright directive that will impose additional obligations on online platforms, and failure to comply could give rise to significant liability. Other recent laws in
Germany (extremist content), Australia (violent content), India (intermediary liability) and Singapore (online falsehoods), as well as other new similar laws, may also expose cloud-computing companies like us to significant liability. We may
incur additional costs to comply with these new laws, which may have an adverse effect on our business, results of operations, and financial condition. Potential litigation could expose us to claims for damages and affect our operations.
Online applications are subject to various
laws and regulations relating to children’s privacy and protection, which if violated, could subject us to an increased risk of litigation and regulatory actions.
In recent years, a variety of laws and regulations have been adopted
aimed at protecting children using the internet, including the COPPA and Article 8 of the GDPR and the UK GDPR. We implement certain precautions designed to prevent minors from gaining access to our product and services, and we use a combination
of human and automated tooling to identify and block accounts that may be associated with minors. Despite these and other measures, minors may gain access to our products and services and there can be no assurances that the measures we take will
be sufficient to eliminate minors’ potential access which could result in allegations of COPPA and related violations, which could expose us to significant liability, penalties, reputational harm, and loss of revenue, among other things. We have
been in the past, and may be in the future, subject to litigation or allegations relating to our products and services being accessed by minors. Additionally, new regulations are being considered in various jurisdictions to require the monitoring
of user content or the verification of users’ identities and age. Any such new regulations, or changes to existing regulations, could increase the cost of our operations and expose us to significant liability, penalties, reputational harm, and
loss of revenue, among other things. Our policy and practice are that when we learn that Child Sexual Abuse Materials (CSAM) have been transmitted on the platform, we ban the user, remove the content, and submit a report to the National Center
for Missing and Exploited Children. However, we may not always identify circumstances in which CSAM is transmitted on the platform.
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The occurrence of any of these or other factors could negatively
affect our business, financial condition, and results of operations.
We are subject to taxation-related risks in
multiple jurisdictions and may have exposure to greater than anticipated tax liabilities.
We are a U.S.-based multinational company subject to taxes in
multiple U.S. and foreign tax jurisdictions. Our income tax obligations are based on our corporate operating structure and third party and intercompany arrangements, including the way we develop, value, manage, protect and use our intellectual
property and the valuations of our intercompany transactions. The tax laws applicable to our international business activities, including the laws of the U.S., Canada and other jurisdictions, are subject to change and uncertain interpretation.
The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing developed technology, intercompany arrangements, or transfer pricing, which could increase our worldwide effective tax rate and the amount
of taxes we pay and seriously harm our business. In addition, our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax rates and higher than anticipated in
jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by changes in tax laws, regulations, or accounting principles. Taxing authorities may also determine that the way we
operate our business is not consistent with how we report our income, which could increase our effective tax rate and the amount of taxes we pay and harm our business. We are subject to regular review and audit by U.S. federal and state and
foreign tax authorities. Any adverse outcome from a review or audit could have a negative effect on our business, financial condition, results of operation and cash flows.
In addition, tax laws are frequently being re-examined and evaluated
globally. New laws and interpretations of the law are considered for financial statement purposes in the quarter or year in which they become applicable. Tax authorities are increasingly scrutinizing the tax positions of companies. Many countries
in the European Union, as well as several other countries and organizations such as the Organization for Economic Cooperation and Development and the European Commission, are actively considering changes to existing tax laws that, if enacted,
could increase our tax obligations in countries where we conduct our business. These proposals include changes to the existing framework to calculate income taxes, as well as proposals to change or impose new types of non-income taxes, such as
taxes based on a percentage of revenue. For example, several countries in the European Union have proposed or enacted taxes applicable to digital services, which includes business activities on social media platforms and online marketplaces and
would likely apply to our business. Many questions remain about the enactment, form, and application of these digital services taxes. The interpretation and implementation of the various digital services taxes (especially if there is
inconsistency in the application of these taxes across tax jurisdictions) could have a materially adverse impact on our business, results of operations, and cash flows. For example, recently published Treasury Regulations may limit or eliminate
the availability of foreign tax credits for some or all of any digital services taxes we pay in non-U.S. jurisdictions, thereby increasing our overall tax burden. Moreover, if the U.S., Canada or other foreign tax authorities change applicable
tax laws, our overall taxes could increase, and our business, financial condition or results of operations may be adversely impacted.
In addition, the determination of our worldwide provision for income
taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the ultimate tax determination is uncertain. Although we believe that our estimates are reasonable and consistent with the tax laws
in the jurisdictions in which we conduct our business, the ultimate tax outcome may differ from the amounts recorded in our financial statements and our positions may be challenged by jurisdictional tax authorities, any of which may materially
affect our financial results in the period or periods for which such determination is made. Therefore, our future income tax obligations could be volatile and difficult to predict due to changes in tax laws, regulation or accounting principles.
Legal, political, and economic uncertainty
surrounding the exit of the United Kingdom from the European Union, or Brexit, and the implementation of the trade and cooperation agreement between the United Kingdom and the European Union could have a material adverse effect on our business.
Because we conduct business in the United Kingdom and the European
Union, we face risks associated with the potential uncertainty and disruptions related to the withdrawal of the United Kingdom from the European Union, commonly referred to as “Brexit.” Although the United Kingdom and the European Union have
entered into a trade and cooperation agreement (the “Trade and Cooperation Agreement”), the long-term nature of the United Kingdom’s relationship with the European Union following the Brexit and the
implementation and application of the Trade and Cooperation Agreement remain uncertain, including with respect to volatility in exchange rates and interest
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rates, disruptions to the free movement of data, goods, services, people and capital
between the United Kingdom and the European Union, and potential material changes to the regulatory regime applicable to our operations in the United Kingdom. The uncertainty concerning the United Kingdom’s future legal, political, and economic
relationship with the European Union could adversely affect political, regulatory, economic, or market conditions in the European Union, the United Kingdom and worldwide, and could contribute to instability in global political institutions,
regulatory agencies, and financial markets. These developments, or the perception that any of them could occur, have had, and may continue to have, a material adverse effect on global economic conditions and the stability of global financial
markets, and they could significantly reduce global market liquidity and limit the ability of key market participants to operate in certain financial markets. Brexit could also lead to a period of considerable uncertainty in relation to the
United Kingdom financial and banking markets, as well as to the regulatory process in Europe. Asset valuations, currency exchange rates, and credit ratings may also be subject to increased market volatility.
As a result of Brexit, we may also face new regulatory costs and
challenges that could have a material adverse effect on our operations. For example, as of January 1, 2021, the United Kingdom lost the benefits of global trade agreements negotiated by the European Union on behalf of its members, which may
result in increased trade barriers that could make our ability to conduct business in areas that are subject to such global trade agreements more difficult. In addition, Brexit could lead to legal uncertainty and potentially divergent national
laws and regulations as the United Kingdom determines which laws of the European Union to replace or replicate. For example, Brexit could lead to potentially divergent laws and regulations, such as with respect to data protection and data
transfer laws, that could be costly and difficult for us to comply with. There may continue to be economic uncertainty surrounding the consequences of Brexit that adversely impact customer confidence resulting in customers reducing their spending
budgets on our services. While we continue to monitor these developments, the full effect of Brexit on our operations is uncertain and our business our business, financial condition, and results of operations could be materially and adversely
affected.
Risks Related to Our Indebtedness
Our indebtedness could materially adversely
affect our financial condition, our ability to raise additional capital to fund our operations, operate our business, react to changes in the economy or our industry, meet our obligations under our outstanding indebtedness, including significant
operating and financial restrictions imposed on us by our debt agreements, and it could divert our cash flow from operations for debt payments.
As of September 30, 2022, we had total outstanding indebtedness
(net) of approximately $194.7 million, consisting of outstanding borrowings under our senior secured credit facilities. In November 2022, we incurred an additional $170.8 million in indebtedness under the senior secured credit facilities. See
Note 13 to Legacy Grindr's unaudited condensed consolidated financial statements for the nine months ended September 30, 2022 beginning on page F-47 of this prospectus for further information.
In June 2020, as part of San Vicente Holdings LLC’s (“SVH”) indirect acquisition of approximately 98.6% interest in Legacy Grindr (and its subsidiaries) from Kunlun Grindr Holdings Limited (“Kunlun”), San Vicente Acquisition
LLC, an indirect subsidiary of SVH (“SV Acquisition”) agreed to pay what, after adjustments provided for in the acquisition agreement, amounted to a $230.0 million deferred consideration payment liability
to Kunlun, payable on the second and third anniversary of the closing date (the “Deferred Payment”). In connection with the acquisition, SV Acquisition assigned the obligations for the Deferred Payment to
Legacy Grindr, and subsequently, through a series of assumption agreements, SV Acquisition re-assumed the obligations for the Deferred Payment. In June 2022, Legacy Grindr declared a distribution of $83.3 million to its members, including an
affiliate of SV Acquisition, on a pro rata basis. Legacy Grindr paid this distribution in June and July 2022. SV Acquisition’s affiliate, San Vicente Group Holdings LLC (“SV Group Holdings”), received its
ratable share of this distribution, being $75.0 million, and distributed that amount through intermediate holding companies to SV Acquisition, which then paid such amount to Kunlun in partial satisfaction of the Deferred Payment obligation,
thereby reducing such obligation to $155.0 million. The cash transfer to Kunlun was effected by Legacy Grindr at the instruction of SV Group Holdings. The Deferred Payment obligation was fully repaid within ten (10) business days of Closing. See
the section titled “ Management's Discussion and Analysis of Financial Condition and Results of Operation—Financing Arrangements” that appears elsewhere in this prospectus for further information. The
obligations under the Credit Agreement are subject to automatic acceleration upon a voluntary or involuntary bankruptcy event of default, and are subject to acceleration at the election of the lenders upon the continuance of any other event of
default, including a material adverse change in the business, operations or conditions of the Company.
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The Credit Agreement that governs our senior secured credit
facilities imposes significant operating and financial restrictions on us. These restrictions will limit our ability and/or the ability of our subsidiaries to, among other things:
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prepay, redeem or repurchase any subordinated indebtedness or enter into amendments to certain subordinated indebtedness in a
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transfer or sell assets.
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In addition, the Credit Agreement requires us to maintain a total
leverage ratio of no greater than 4.75 to 1.00 prior to and through March 31, 2022, and thereafter, no greater than 3.25 to 1.00. As a result of these and other restrictions, we may be limited as to how it conducts business, and we may be unable
to raise additional debt or equity financing to compete effectively or to take advantage of new business opportunities. The terms of any future indebtedness that we may incur could include similar or more restrictive covenants. We cannot assure
you that it will be able to maintain compliance with these covenants in the future and, if it fails to do so, that we will be able to obtain waivers from the lenders and/or amend the covenants. Our failure to comply with the restrictive or
financial covenants described above, as well as the terms of any future indebtedness could result in an event of default, which, if not cured or waived, could result in us being required to repay these borrowings before their due date. If we are
forced to refinance these borrowings on less favorable terms or if it is unable to refinance these borrowings, our business, financial condition, and results of operations could be materially adversely affected.
Furthermore, we may be able to incur substantial additional
indebtedness in the future. The terms of the credit agreements governing our indebtedness limit, but do not prohibit, us from incurring additional indebtedness, and the additional indebtedness incurred in compliance with these restrictions could
be substantial. These restrictions will also not prevent us from incurring obligations that do not constitute “Indebtedness” as defined in the agreements governing our indebtedness. If new indebtedness is added to our current debt levels, the
related risks that we now face could intensify.
The obligations under the Credit Agreement are subject to automatic
acceleration upon a voluntary or involuntary bankruptcy event of default, and are subject to acceleration at the election of the lenders upon the continuance of any other event of default, including a material adverse change in the business,
operations or conditions of the Company. A default interest rate of an additional 2.0% per annum will apply on all outstanding obligations during the occurrence and continuance of an event of default. The Credit Agreement includes restrictive
non-financial and financial covenants, including the requirement to maintain a total leverage ratio no greater than 4.75:1.00 prior to and through March 31, 2022, and no greater than 3.25:1.00 thereafter. See the section titled “Management's Discussion and Analysis of Financial Condition and Results of Operation—Financing Arrangements” that appears elsewhere in this prospectus for further information.
Offshore Holdings’ independent registered
public accounting firm has expressed substantial doubt as to Offshore Holdings’ ability to continue as a going concern in its reports.
In its reports on Offshore Holdings' financial statements, Offshore
Holdings' independent registered public accounting firm included an explanatory paragraph expressing substantial doubt regarding Offshore Holdings’ ability to continue as a going concern. See Note 1 to Offshore Holdings' unaudited consolidated
financial statements and audited consolidated financial statements included elsewhere in this prospectus. As of September 30, 2022, Offshore Holdings had cash of $27.2 million and had a liability of $140.1 million related to the Deferred Payment
which matures in June 2023. In accordance with the terms of the Agreement and Plan of Merger with Tiga that was signed on May 9, 2022, we are permitted to distribute up to $370.0 million to our members to repay the entire Deferred Payment that
currently exists with cash from the Business Combination. In June 2022, we declared a distribution of
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$83.3 million to the members and subsidiaries of Offshore Holdings used Offshore
Holdings' pro rata share of the distribution, being $75.0 million, to partially satisfy the Deferred Payment obligation. In connection with Closing, the Deferred Payment obligation was fully repaid with cash, a portion of which was obtained from
borrowings under our senior secured credit facilities.
Risks Related to Ownership of our Securities
We have a limited operating history and, as a
result, our past results may not be indicative of future operating performance.
As explained above, our management team has limited history working
together, which makes it difficult to forecast our future results. See “—Risks Related to our Brand, Products and Services, and Operations—We have grown rapidly in recent years and certain members of our
management team have joined us recently. If we are unable to manage our operations or growth effectively, our brand, company culture, and financial performance may suffer.” You should not rely on our past annual or quarterly operating
results as indicators of future performance. In addition, you should consider and evaluate our prospects in light of the risks and uncertainties frequently encountered by companies in rapidly evolving markets like ours, as well as the information
included elsewhere in this prospectus.
Our reported financial results may be
adversely affected by changes in accounting principles generally accepted in the United States.
Generally accepted accounting principles in the United States are
subject to interpretation by the Financial Accounting Standards Board (“FASB”), the American Institute of Certified Public Accountants, the SEC and various bodies formed to promulgate and interpret
appropriate accounting principles. A change in these principles or interpretations could have a significant effect on our reported financial results, and could affect the reporting of transactions completed before the announcement of a change.
There is no guarantee that our Warrants will
be in the money at the time they become exercisable, and they may expire worthless.
The exercise price for our Warrants is $11.50 per warrant. We
believe the likelihood that warrant holders will exercise their warrants, and therefore the amount of cash proceeds that we would receive, is dependent upon the trading price of our Common Stock. If the trading price for our Common Stock is less
than $11.50 per share, we believe holders of our Warrants will be unlikely to exercise their warrants. There is no guarantee that the Warrants will be in the money following the time they become exercisable and prior to their expiration, and as
such, the warrants may expire worthless.
The requirements of being a public company may
strain our resources, divert management’s attention and affect our ability to attract and retain executive management and qualified board members.
As a public company, we are subject to the reporting requirements of
the Exchange Act, the listing standards of NYSE and other applicable securities rules and regulations. The requirements of these rules and regulations will continue to increase our legal, accounting and financial compliance costs, make some
activities more difficult, time-consuming, and costly, and place significant strain on our personnel, systems and resources. Furthermore, several members of our management team do not have prior experience in running a public company. The
Exchange Act requires, among other things, that we file annual, quarterly and current reports with respect to our business and results of operations. As a result of the complexity involved in complying with the rules and regulations applicable to
public companies, our management’s attention may be diverted from other business concerns, which could harm our business, results of operations and financial condition. Although we have already hired additional employees to assist us in complying
with these requirements, we may need to hire more employees in the future or engage outside consultants, which will increase our operating expenses. In addition, changing laws, regulations and standards relating to corporate governance and public
disclosure are creating uncertainty for public companies, increasing legal and financial compliance costs and making some activities more time-consuming. These laws, regulations and standards are subject to varying interpretations, in many cases
due to their lack of specificity, and, as a result, their application in practice may evolve over time as new guidance is provided by regulatory and governing bodies. This could result in continuing uncertainty regarding compliance matters and
higher costs necessitated by ongoing revisions to disclosure and governance practices. We intend to invest substantial resources to comply with evolving laws, regulations and standards, and this investment may result in increased general and
administrative expenses and a diversion of management’s time and attention from business operations to compliance activities. If our efforts to comply with new laws, regulations and standards differ from the activities intended by regulatory
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or governing bodies due to ambiguities related to their application and practice,
regulatory authorities may initiate legal proceedings against us and our business may be harmed. We also expect that being a public company that is subject to these new rules and regulations will make it more expensive for us to obtain director
and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain coverage. These factors could also make it more difficult for us to attract and retain qualified members of our board
of directors (the “Board”), particularly members who can serve on our audit committee, and qualified executive officers. As a result of the disclosure obligations required of a public company, our business and financial condition will become more
visible, which may result in an increased risk of threatened or actual litigation, including by competitors and other third parties. If such claims are successful, our business, results of operations and financial condition would be harmed, and
even if the claims do not result in litigation or are resolved in our favor, these claims, and the time and resources necessary to resolve them, would divert the resources of our management and harm our business, results of operations and
financial condition.
We will incur significantly increased costs
and devote substantial management time as a result of operating as a public company.
As a public company, we will incur significant legal, accounting and
other expenses that we would not incur as a private company. For example, we are subject to the reporting requirements of the Exchange Act, and are required to comply with the applicable requirements of the Sarbanes-Oxley Act and the Dodd-Frank
Wall Street Reform and Consumer Protection Act, as well as rules and regulations of the SEC and NYSE, including the establishment and maintenance of effective disclosure and financial controls, changes in corporate governance practices and
required filing of annual, quarterly and current reports with respect to our business and results of operations. Any failure to develop or maintain effective controls or any difficulties encountered in their implementation or improvement could
harm our results of operations or cause us to fail to meet our reporting obligations. Our compliance with these requirements increases our legal and financial compliance costs and make some activities more time-consuming and costly. In addition,
our management and other personnel need to divert attention from operational and other business matters to devote substantial time to these public company requirements. In particular, we incur significant expenses and devote substantial
management effort toward ensuring compliance with the requirements of Section 404 of the Sarbanes-Oxley Act, which will increase when we are no longer an emerging growth company. We are in the process of hiring additional accounting personnel
and, as a public company, may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and may need to establish an internal audit function.
Operating as a public company makes it more expensive for us to
obtain director and officer liability insurance, and we may be required to accept reduced coverage or incur substantially higher costs to obtain same or similar coverage. This could also make it more difficult for us to attract and retain
qualified people to serve on our Board, board committees or as executive officers.
NYSE may be unable to maintain the listing of
our securities on NYSE, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
In connection with the Business Combination, in order to continue to
obtain the listing of our securities on NYSE, we were required to demonstrate compliance with NYSE’s initial listing requirements, which are more rigorous than NYSE’s continued listing requirements. Although we successfully had our securities
listed on NYSE, we may be unable to maintain the listing of its securities in the future.
If we fail to maintain our listing, and if NYSE or another national
securities exchange ceases to list our securities on its exchange, our shareholders could face significant material adverse consequences, including:
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a limited availability of market quotations for our securities;
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reduced liquidity for our securities;
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a determination that our Common Stock is a “penny stock” which will require brokers trading our Common Stock to adhere to more
stringent rules and possibly result in a reduced level of trading activity in the secondary trading market for our securities;
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a limited amount of news and analyst coverage; and
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a decreased ability to issue additional securities or obtain additional financing in the future.
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The National Securities Markets Improvement Act of 1996, which is a
federal statute, prevents or preempts the states from regulating the sale of certain securities, which are referred to as “covered securities.” If our securities are
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no longer listed on the NYSE, such securities would not qualify as covered
securities and we would be subject to regulation in each state in which it offers its securities because states are not preempted from regulating the sale of securities that are not covered securities.
The price of our securities may be volatile.
The price of our securities may fluctuate due to a variety of
factors, including:
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changes in the industry in which we operate;
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the success of competitive services or technologies;
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developments involving our competitors;
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regulatory or legal developments in the United States and other countries;
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developments or disputes concerning our intellectual property or other proprietary rights;
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the recruitment or departure of key personnel;
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actual or anticipated changes in estimates as to financial results, development timelines or recommendations by securities
analysts;
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variations in our financial results or those of companies that are perceived to be similar to us;
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general economic, industry and market conditions, such as the effects of the COVID-19 pandemic, the 2022 mpox outbreak,
recissions, interest rates, inflation, international currency fluctuations, political instability and acts of war or terrorism; and
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the other factors described in this “Risk Factors” section.
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These market and industry factors may materially reduce the market
price of our Common Stock regardless of our operating performance, including our businesses acquired in the Business Combination.
Future resales of our Common Stock and/or
Warrants may cause the market price of our securities to drop significantly, even if our business is doing well.
Pursuant to the A&R Registration Rights Agreement, the Sponsor
and Tiga's founders, including their respective affiliates, are contractually restricted from selling or transferring any of its shares of Common Stock (the “Lock-up Shares”), other than (i) any transfer to
an affiliate of a holder, (ii) distribution to profit interest holders or other equity holders in such holder or (iii) as a pledge in a bona fide transaction to third parties as collateral to secure obligations under lending arrangements with
third parties. Such restrictions began at Closing and end on the earliest of (i) 365 days after the date of the Closing; (ii) the first day after the date on which the closing price of the Common Stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date of the Closing; or (iii) the date on which we
complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our public shareholders having the right to exchange their Common Stock for cash, securities or other property.
However, following the expiration of such lockup, the Sponsor and
Tiga's founders, including their respective affiliates, will not be restricted from selling shares of our Common Stock and/or Warrants held by them, other than by applicable securities laws. Additionally, neither the forward purchase shareholders
nor the Legacy Grindr unitholders party to the A&R Registration Rights Agreement will be restricted from selling any of their shares of Common Stock following the closing of the Business Combination. As such, sales of a substantial number of
shares of Common Stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell shares, could reduce the market price of our Common Stock. The Lock-up
Shares may be sold after the expiration of the applicable lock-up period under the A&R Registration Rights Agreements. As restrictions on resale end and registration statements (filed after the Closing to provide for the resale of such shares
from time to time) are available for use, the sale or possibility of sale of these shares could have the effect of increasing the volatility in our share price or the market price of our Common Stock could decline if the holders of currently
restricted shares sell them or are perceived by the market as intending to sell them.
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In addition, we may issue additional shares of our Common Stock
or other equity securities without the approval of investors, which would reduce investors’ proportionate ownership interests and may depress the market price of our Common Stock.
Sales of our Common Stock and/or Warrants or
the perception of such sales, by us or the selling securityholders pursuant to this prospectus, in the public market or otherwise, could cause the market price for our securities to decline, even though the selling securityholders would still
realize a profit on sales at lower prices. Resales of the securities offered by this prospectus may cause the market price of such securities to drop significantly, even if our business is doing well.
We have filed the registration statement of which this prospectus
forms a part in order to register the resale under the Securities Act of the Common Stock and certain warrants held by certain securityholders, including the founders, the Sponsors and the Legacy Grindr unitholders. We will not receive any of the
proceeds from such sales, except with respect to amounts received by us upon exercise of warrants, which depends on the relative price of our Common Stock and the extent to which such warrants are exercised for cash. If the warrants are out of
the money, the warrant holders may not exercise their warrants.
The sale of our Common Stock in the public market or otherwise,
including sales pursuant to this prospectus, or the perception that such sales could occur, could harm the prevailing market price of our Common Stock. These sales, or the possibility that these sales may occur, also might make it more difficult
for us to sell equity securities in the future at a time and at a price that we deem appropriate. Resales of our Common Stock may cause the market price of our securities to drop significantly, even if our business is doing well. In addition, the
selling securityholders named in this prospectus hold a disproportionately large portion of our outstanding Common Stock. For example, our two largest stockholders, G. Raymond Zage, III and James Fu Bin Lu, who beneficially own approximately
72.8% of our issued and outstanding Common Stock in the aggregate, will be able to sell all of his securities held for so long as the registration statement of which this prospectus forms a part is in effect, subject to any applicable lock-up
restrictions. Such restrictions began at the Closing and end on the earliest of (i) 365 days after the date of the Closing; (ii) the first day after the date on which the closing price of the Common Stock equals or exceeds $12.00 per share (as
adjusted for stock splits, stock dividends, reorganizations, recapitalizations and the like) for any 20 trading days within any 30-trading day period commencing at least 150 days after the date of the Closing; or (iii) the date on which we
complete a liquidation, merger, capital stock exchange, reorganization or other similar transaction that results in all of our public shareholders having the right to exchange their Common Stock for cash, securities or other property. See “—Future resales of our Common Stock and/or Warrants may cause the market price of our securities to drop significantly, even if our business is doing well” in this “Risk
Factors” section and “Selling Securityholders” in this prospectus for more information on lock-up restrictions. Even if the trading price of our Common Stock falls to or significantly below the
current trading price, the selling securityholders may still have an incentive to sell and profit due to the nominal purchase prices paid by such selling securityholders, which are significantly lower than the purchase prices paid by the public
securityholders. Certain of our selling securityholders acquired the Common Stock at prices that are significantly lower than the current trading price of our Common Stock. The founders of Tiga paid approximately $0.0036 per share for each share
of Common Stock and $1.00 per private placement warrant for each private placement warrant being offered pursuant to this prospectus. The Common Stock being offered for resale pursuant to this prospectus by the selling securityholders would
represent approximately 83.0% of our outstanding Common Stock as of January 6, 2023 (after giving effect to the issuance of the shares issuable upon exercise of the Warrants held by the selling securityholders and the acquisition of shares
acquirable upon the exercise of certain options). While such selling securityholders may experience a positive rate of return based on the current trading price of our Common Stock, the public securityholders may not experience a similar rate of
return on the securities they purchased due to differences in the purchase prices and the trading price at the time of such sales.
Additionally, a portion of our Common Stock, including Common Stock
held by Mr. Zage, are subject to a lock-up and restricted from immediate resale; however, upon expiration of their respective lock-up periods, the sale of shares of such Common Stock or the perception that such sales may occur, could cause the
market price of our Common Stock to drop significantly.
We may be subject to securities litigation,
which is expensive and could divert management attention.
The market price of our securities may be volatile and, in the past,
companies that have experienced volatility in the market price of their securities have been subject to securities class action litigation. We may be the target of this type of litigation in the future. Securities litigation against us could
result in substantial costs and divert management’s attention from other business concerns, which could seriously harm its business.
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Reports published by analysts or the ceasing
of publication of research or reports about us, including projections in those reports that differ from our actual results, could adversely affect the price and trading volume of our securities.
Securities research analysts may establish and publish their own
research and reports, including periodic projections, for our stock, and the trading market for our stock will be influenced by such research and reports or the lack thereof. These research and reports may vary widely and may not accurately
predict the results we actually achieve. Our share price may decline if its actual results do not match the projections of these securities research analysts. Similarly, if one or more of the analysts who write reports on Grindr downgrades our
stock or publishes inaccurate or unfavorable research about our business, our stock price could decline. If one or more of these analysts ceases coverage of Grindr or fails to publish reports on Grindr regularly, our securities price or trading
volume could decline. While we expect research analyst coverage to continue, if analysts cease to continue coverage of Grindr, we could use visibility in the financial markets, and the market price and volume for our securities could be adversely
affected.
We do not intend to pay cash dividends for the
foreseeable future.
We intend to retain our future earnings, if any, to finance the
further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be at the discretion of our Board and will depend on its financial condition,
results of operations, capital requirements and future agreements and financing instruments, business prospects and such other factors as its Board deems relevant. As a result, you may not receive any return on an investment in our Common Stock
unless you sell our Common Stock for a price greater than that which you paid for it.
General Risk Factors
A downturn in the global economy, especially in
the U.S. and Europe, where a substantial majority of our revenue is generated could adversely harm our business.
Our performance depends, at least in part, on global economic
conditions and their impact on levels of spending by our subscribers and advertisers. A decline in general economic conditions, including but not limited to recent inflationary movements, especially in the U.S. and Europe, where we generate a
substantial majority of our revenue, may adversely affect levels of consumer discretionary spending, the demands for our products and services, as well as advertising expenditures, any of which could materially adversely affect our business,
financial condition, and results of operations.
In addition, given the cyclical nature of the global economy, a
recessionary period may occur in the future, which could negatively affect our business, financial condition, and results of operation. The ongoing U.S.-China trade tension and other international diplomatic issues, as well as geopolitical
conflicts, including the military conflict involving Russia and Ukraine, and the economic sanctions imposed on Russia, present additional uncertainties for the U.S. and global economies. There can be no assurances that future economic conditions
in the U.S. or elsewhere around the world will be favorable to our business.
Our employees could engage in misconduct that
materially adversely affects us.
Our employees could engage in misconduct that could have a
materially adverse effect on us. We may not be able to prevent or detect misconduct by our employees, either personal or in the course of their duties on behalf of us, and the precautions we take to prevent and detect this activity may not be
effective. See “—Risks Related to Regulation and Litigation—Online applications are subject to various laws and regulations relating to children’s privacy and protection, which if violated, could subject us to an
increased risk of litigation and regulatory actions.” If any of our employees were to engage in or be accused of misconduct, we could be exposed to legal liability, negative publicity, our business and reputation could be materially
adversely affected, and we could fail to retain key employees. See “—Risks Related to our Brand, Products and Services, and Operations—Unfavorable media coverage could materially and adversely affect our
business, brand, or reputation.”
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Certain industry data and market data included in this prospectus
were obtained from independent third-party surveys, market research, publicly available information, reports of governmental agencies and industry publications and surveys. All of management’s estimates presented herein are based upon
management’s review of independent third-party surveys and industry publications prepared by a number of sources and other publicly available information. All of the market data used in this prospectus involves a number of assumptions and
limitations, and you are cautioned not to give undue weight to such estimates. We believe that the information from these industry publications and surveys included in this prospectus is reliable. The industry in which we operate is subject to a
high degree of uncertainty and risk due to a variety of factors, including those described in the section titled “Risk Factors.” These and other factors could cause results to differ materially from those
expressed in the estimates made by the independent parties and by us.
The sources of certain statistical data, estimates and forecasts
contained in this prospectus include the following independent industry publications or reports:
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Global Social Networking Applications Industry, Independent Market Research by Frost & Sullivan, March 2022, which was
commissioned by Legacy Grindr in 2021 and 2022 (the “Frost & Sullivan Study”).
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ILGA World, State-Sponsored Homophobia Global Legislation Overview Update Report, 2022 (the “ILGA
World Report”).
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Morning Consult April–May 2022 Q1 Survey of 1000 GBTQ US Adults, commissioned by Legacy Grindr (the “Morning Consult Survey”).
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Certain monetary amounts, percentages and other figures included in
this prospectus have been subject to rounding adjustments. Accordingly, figures shown as totals in certain tables or charts may not be the arithmetic aggregation of the figures that precede them, and figures expressed as percentages in the text
may not total 100% or, as applicable, when aggregated may not be the arithmetic aggregation of the percentages that precede them.
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All of the shares of Common Stock and Warrants offered by the
selling securityholders pursuant to this prospectus will be sold by the selling securityholders for their respective accounts. We will not receive any of the proceeds from these sales. We will pay certain expenses associated with the registration
of the securities as described in the “Plan of Distribution” section in this prospectus.
We will receive up to an aggregate of approximately $429,640,000
from the exercise of the Warrants, assuming the exercise in full of all of the Warrants for cash. We expect to use the net proceeds from the exercise of the Warrants for general corporate purposes. We will have broad discretion over the use of
proceeds from the exercise of the Warrants. There is no assurance that the holders of the Warrants will elect to exercise any or all of such Warrants. To the extent that the Warrants are exercised on a “cashless basis,” the amount of cash we
would receive from the exercise of the Warrants will decrease. However, if the warrants are out of the money, the warrant holders are not likely to exercise their warrants.
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The offering price of the shares of Common Stock underlying the
Warrants offered hereby is determined by reference to the exercise price of the Warrants of $11.50 per share. The Public Warrants are listed on NYSE under the symbol “GRND.WS.”
We cannot currently determine the price or prices at which shares of
Common Stock or Warrants may be sold by the selling securityholders under this prospectus.
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Market Information
Our Common Stock and Public Warrants are currently listed on NYSE
under the symbols “GRND” and “GRND.WS,” respectively. Prior to the Closing, Tiga’s Class A ordinary shares, units and warrants were listed on NYSE under the symbols “TINV,” “TINV.U,” and “TINV.WS,” respectively. As of January 6, 2023, following
the completion of the Business Combination, there were 64 holders of record of the Common Stock and 6 holders of record of our Warrants. We currently do not intend to list the Private Placement Warrants on any stock exchange or stock market.
Dividend Policy
We have not declared or paid any dividends on shares of Common Stock
to date. We anticipate that we will retain our future earnings to finance the further development and expansion of our business and do not intend to pay cash dividends in the foreseeable future. Any future determination to pay dividends will be
at the discretion of the Board and will depend on our financial condition, results of operations, capital requirements and future agreements and financing instruments, business prospects, and such other factors as the Board deems relevant. In
addition, Grindr’s Credit Agreement, dated as of June 10, 2020, among Grindr Gap LLC, Grindr Capital LLC, Fortress Credit Corp., and the other parties thereto, as amended, contain restrictions on its ability to pay dividends.
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FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion and analysis of our
financial condition and results of operations should be read in conjunction with the “Condensed Consolidated Financial Statements of Legacy Grindr (unaudited)” and related notes and the “Condensed Consolidated Financial Statements of San Vicente
Holdings (Cayman) Limited” and the related notes that appear elsewhere in this prospectus. Our historical results do not necessarily reflect what our historical financial position and results of operations would have been had we been a
stand-alone public company during the periods presented. In addition, our historical results are not necessarily indicative of the results to be expected for any future period, and results for any interim period are not necessarily indicative of
the results to be expected for the full year.
In addition to historical consolidated financial
information, the following discussion contains forward-looking statements that reflect our plans, estimates and beliefs. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause
or contribute to these differences include those discussed below and elsewhere in this prospectus, particularly in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” in this prospectus.
Overview
We are the world’s largest social network focused on the LGBTQ
community with approximately 10.8 million MAUs and approximately 601 thousand Paying Users (as defined below) in 2021. Our Paying Users were over 815 and 768 thousand for the three and nine months ended September 30, 2022, respectively. According
to the Frost & Sullivan Study commissioned by Legacy Grindr, we are the largest and most popular gay mobile app in the world, with more MAUs than other LGBTQ social networking applications. Our mission is to connect queer people with one
another and the world. Since our inception in 2009 as a casual dating app for gay men, we have evolved into a global LGBTQ social network platform serving and addressing the needs of the entire LGBTQ queer community. We believe Grindr is a vital
utility for the LGBTQ community and our users, as evidenced by our user engagement. Our users are some of the most engaged, spending, on average, 61 minutes per day on our platform compared to 10-20 minutes on dating apps, according to the Frost
& Sullivan Study commissioned by Legacy Grindr, and 25-35 minutes on social networking apps, according to Statista.
We have grown significantly over the years since our product launch.
For the three months ended September 30, 2022 and 2021, we generated $50.4 million and $38.2 million of revenue, respectively, and for the nine months ended September 30, 2022 and 2021, we generated $140.5 million and $100.8 million of revenue,
respectively, representing a period-over-period growth of 31.9% and 39.4% as compared to the three-month and nine-month periods in 2021, respectively. We had over 815 and 768 thousand Paying Users for the three and nine months ended September 30,
2022, representing a period-over-period growth of 33.3% and 33.1% as compared to the same period in 2021. In 2021, we generated $145.8 million of revenue, representing year-over-year growth of 39.5% as compared to the combined Legacy Grindr, and
its subsidiaries (collectively referred to herein as the “Successor”) 2020 Period and Legacy Grindr (f/k/a Grindr Inc., a Delaware corporation, which was f/k/a KL Grindr Holdings Inc., a Delaware
corporation) and its subsidiaries (the “Predecessor”) 2020 Period (as defined below) and approximately 601 thousand Paying Users, which is 2.2% higher than our Paying Users from 2020. We have users in over
190 countries or territories and support 21 languages on our platform. On average, profiles on our platform sent over 260.0 million daily messages in 2021.
Despite our growth, we believe we are just beginning to scratch the
surface of our market opportunity and financial potential. According to the Frost & Sullivan Study commissioned by Legacy Grindr, the LGBTQ population is growing faster than the overall population and younger generations are driving this
growth. We expect this trend to continue as social norms shift, more progressive attitudes surface, and people become more comfortable expressing themselves openly. As this group grows, gains influence, and becomes more digitally connected, we
believe we are well positioned to continue to be the leading platform for this group to connect with each other. The Frost & Sullivan Study commissioned by Legacy Grindr estimates the global LGBTQ population at 538.4 million in 2021 with
approximately $10.9 trillion of GDP at purchasing power parity. In 2021, our MAUs and revenue imply we have only captured around 2.0% of the LGBTQ population and less than 0.01% of the spend. As the world’s largest social network focused on the
LGBTQ community, we have significant opportunities to grow both our users and our revenue through new products and services and additional monetization features.
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In June 2020, San Vicente Holdings LLC (“SVH”) acquired, through SV Acquisition LLC (“SV Acquisition”), approximately 98.6% interest in the Predecessor from Kunlun Holdings Limited (“Kunlun”). The remaining interest was held as restricted stock. The transaction resulted in related entities being consolidated for financial reporting with the financial statements reflecting the adjustments of assets and
liabilities to fair market value (“FMV”) at the transaction date. The Predecessor reorganized and converted to Grindr Holdings LLC through a series of related transactions and entities. To distinguish
between the difference in basis of accounting due to the acquisition that occurred on June 10, 2020, the information below presents operations for two periods, Predecessor and Successor, which relate to the periods preceding and the periods
succeeding the acquisition, respectively. References to the “Successor 2020 Period” in the discussion below refers to the period from June 11, 2020 to December 31, 2020. References to the “Predecessor 2020 Period” in the discussion below refers
to the period from January 1, 2020 to June 10, 2020. We believe that it remains useful to review the operating results for the Successor 2020 Period and Predecessor 2020 Period as combined for purposes of producing an analysis useful to a user of
the financial statements. Therefore, some of the discussion below considers our analysis of our financial results for the combined Successor 2020 Period and Predecessor 2020 Period (as defined below) with no pro forma adjustments applied to the
periods to reflect the difference in basis.
Prior to the transaction with SVH, we experienced many years of
user, revenue, and Adjusted EBITDA growth. As a result of our growth, our infrastructure and systems were not keeping pace, just like many high growth tech companies in similar situations. Following the transaction with SVH, we spent the next
several months focused on reassessing strategic priorities, updating its technology infrastructure, upgrading our data systems, stabilizing our product, and optimizing our cost structure. As a result, by 2021 we had a nimbler company with modern
tools that resulted in a better and more stable product. This positioned us to take advantage of growth opportunities in 2021 and beyond.
The Grindr App is free to download and provides certain services and
features to our users for free, and then offers a variety of additional controls and features for users who subscribe to our premium products and services, Grindr XTRA and Grindr Unlimited. A substantial portion of our revenues are derived
directly from users in the form of recurring subscription fees, providing our users access to a bundle of features for the period of their subscription, or add-ons to access premium features. Leveraging the strong brand awareness and significant
user network stemming from our first mover advantage in the LGBTQ social networking space, our historical growth in number of users has been driven primarily by word of mouth referrals or other organic means.
While we have users in over 190 countries and territories, our core
markets are currently North America and Europe, from which we derived 87.2%, 87.7%, 89.5%, 86.1%, and 87.8% of our total revenues for the three and nine months ended September 30, 2022, the year ended December 31, 2021, combined Successor 2020
Period and Predecessor 2020 Period, and the year ended December 31, 2019, respectively. We intend to grow our user base and revenues by providing innovative and customized products and services and features to users in targeted geographic regions
outside of our current core markets that have a large number of untapped potential users, favorable regulatory environments, and fast-growing economies.
In addition to our revenue generated from subscription fees and
premium add-ons, we generate a portion of our revenues from both first-party and third-party advertising. Our advertising business provides advertisers with the unique opportunity to directly target and reach the LGBTQ community, which is
characterized by a higher-than-average proportion of well-educated, brand-conscious individuals with substantial aggregate global purchasing power. Advertisers on our Grindr App span across many different industries, including healthcare, gaming,
travel, automotive, and consumer goods. We offer a diverse range of advertising initiatives to advertisers, such as in-app banners, full-screen interstitials, rewarded video, and other customized units, typically sold on an impressions basis.
Additionally, we contract with a variety of third-party advertisement sales platforms to market and sell digital and mobile advertising inventory on our Grindr App. We will continue to evaluate opportunities to increase inventory with unique
advertising units and offerings.
Consolidated Results for the Three Months Ended September 30, 2022 and
2021
For the three months ended September 30, 2022 and 2021, we generated:
|
•
|
Revenues of $50.4 million and $38.2 million, respectively. The increase was $12.2 million, or 31.9%.
|
|
•
|
Net Income (Loss) of $(4.7) million and $1.9 million, respectively. The decrease was $6.6 million, or (347.4)%.
|
|
•
|
Adjusted EBITDA of $24.0 million and $20.5 million, respectively. The increase was $3.5 million, or 17.1%.
|
59
Consolidated Results for the Nine Months Ended September 30, 2022 and
2021
For the nine months ended September 30, 2022 and 2021, we generated:
|
•
|
Revenue of $140.5 million and $100.8 million, respectively. The increase was $39.7 million, or 39.4%.
|
|
•
|
Net Income (Loss) of $(4.3) million and $(1.4) million, respectively. The decrease was $2.9 million, or (207.1)%.
|
|
•
|
Adjusted EBITDA of $65.8 million and $53.7 million, respectively. The increase was $12.1 million, or 22.5%.
|
Consolidated Results for the Year Ended December 31, 2021 and 2020
For the year ended December 31, 2021, Successor 2020 Period and
Predecessor 2020 Period, we generated:
|
•
|
Revenue of $145.8 million, $61.1 million, and $43.4 million, respectively. The increase for the year ended December 31, 2021
compared to the combined Successor 2020 Period and Predecessor 2020 Period was $41.3 million, or 39.5%.
|
|
•
|
Net Income (Loss) of $5.1 million, $(11.0) million, and $(2.1) million, respectively. The increase for the year ended
December 31, 2021 compared to the combined Successor 2020 Period and Predecessor 2020 Period was $18.2 million, or 138.9%.
|
|
•
|
Adjusted EBITDA of $77.1 million, $35.7 million, and $14.9 million, respectively. The increase for the year ended December 31,
2021 compared to the combined Successor 2020 Period and Predecessor 2020 Period was $26.5 million, or 52.4%. See the section titled “Non-GAAP Financial Measures—Adjusted EBITDA” for more details
on the calculations.
|
The Business Combination and Public Company Costs
Pursuant to the Merger Agreement, Legacy Grindr was merged with and
into Merger Sub I, with Legacy Grindr surviving the First Merger as a wholly owned subsidiary of Tiga, and promptly thereafter and as part of the same overall transaction of the First Merger, Legacy Grindr, being the entity that survived the
First Merger, merged with and into Merger Sub II, with Merger Sub II being the entity that survived the Second Merger and continuing in existence as a wholly owned subsidiary of Tiga, in accordance with the terms and conditions of the Merger
Agreement. Upon Closing, the Company received approximately $105.1 million in gross cash proceeds consisting of approximately $5.1 million from the Tiga trust account, $50.0 million from the Forward Purchase Commitment and an additional
$50.0 million from the Backstop Commitment, prior to the payment of outstanding expenses, payment of outstanding obligations (including the payment of the outstanding Kunlun Deferred Payment. In connection with the Business Combination, the
Company amended that certain Credit Agreement with Fortress Credit Corp. and other lenders a party thereto, to enable the Company to borrow an additional aggregate principal amount of $170.8 million through supplemental term loans and Catapult GP
II paid approximately $12.0 million to Legacy Grindr to partially repay the outstanding Catapult Note.
While the legal acquirer in the Merger Agreement is Tiga, for
financial accounting and reporting purposes under U.S. GAAP, Legacy Grindr is the accounting acquirer and the Business Combination is accounted for as a “reverse recapitalization.” A reverse recapitalization (i.e., a capital transaction involving
the issuance of stock by Grindr for the stock of Legacy Grindr) did not result in a new basis of accounting, and the consolidated financial statements of the combined entity represent the continuation of the consolidated financial statements of
Legacy Grindr in many respects. Accordingly, the consolidated assets, liabilities and results of operations of Legacy Grindr became the historical consolidated financial statements of Grindr, and Legacy Grindr’s assets, liabilities, and results
of operations were consolidated with Grindr beginning on the acquisition date. Operations prior to the Business Combination will be presented as those of Grindr in future reports. The net assets of Legacy Grindr were recognized at historical cost
(which was consistent with carrying value), with no goodwill or other intangible assets recorded upon execution of the Business Combination.
Upon becoming an SEC-registered and NYSE-listed company at Closing,
we hired additional personnel and implemented procedures and processes to address public company regulatory requirements and customary practices. The Company expects to incur additional annual expenses as a public company for, among other things,
directors’ and officers’ liability insurance, director fees and additional internal and external accounting, legal and administrative resources, including increased audit and legal fees. The Company is classified as an Emerging Growth Company, as
defined under
60
the Jumpstart Our Business Act (the “Jobs Act”),
which was enacted on April 5, 2012. As a result of the Business Combination, the Company is provided certain disclosure and regulatory relief, provided by the SEC, as an Emerging Growth Company.
Our future results of consolidated operations and financial position
may not be comparable to historical results as a result of the Business Combination.
How We Generate Revenue
We currently generate revenue from two revenue streams—Direct
Revenue (as defined below) and Indirect Revenue (as defined below). Direct Revenue is revenue generated by our users who pay for subscriptions or add-ons to access premium features. Indirect Revenue is generated by third parties who pay us for
access to our users, such as advertising or partnerships.
Direct Revenue is driven predominately by our subscription revenue
and premium add-ons. Our current subscription offerings are Grindr XTRA and Grindr Unlimited. Our subscription revenue has grown through organic user acquisition and the viral network effects enabled by our brand and market position. We utilize a
freemium model to drive increased user acquisition, subscriber conversions, and monetization on the Grindr App. Many of our users choose to pay for premium features and functionalities, such as access to more user profiles, ad-free environments,
advanced filters, unlimited blocks and favorites, and the ability to send multiple photos at the same time, to enhance their user experience. By continuously introducing new premium features, we continue to increase our Paying Users and average
revenue per paying user.
For the years ended December 31, 2021, the combined Successor Period
2020 and Predecessor Period 2020, and 2019, our Adjusted Direct Revenue (as defined below) accounted for 80.2%, 93.1%, and 77.3% of our total revenue, respectively. For the three and nine months ended September 30, 2022 and the three and nine
months ended September 30, 2021, our Adjusted Direct Revenue (as defined below) accounted for 85.7%, 84.3%, 79.8%, and 81.0% of our total revenue, respectively.
Indirect Revenue primarily consists of revenue generated by third
parties who pay us for access to our users, including advertising, partnerships, merchandise, and other non-direct revenue. Our advertising business provides advertisers with the unique opportunity to directly target and reach the LGBTQ
community, which generally consists of well-educated individuals with significant global purchasing power. We have attracted advertisers from a diverse array of industries, including healthcare, gaming, travel, automotive, and consumer goods. We
offer a diverse range of advertising initiatives to advertisers, such as in-app banners, full-screen interstitials, rewarded video, and other customized units, typically on a CPM basis. We contract with a variety of third-party ad platforms to
market and sell digital and mobile advertising inventory on our Grindr App. In exchange for facilitating the advertising process, we pay the relevant third-party ad platform a share of the revenue derived from the advertisements they place on the
Grindr App. We intend to continue to grow our Indirect Revenue through advertising, partnerships, merchandise, and other non-direct initiatives.
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Operating and Financial Metrics
|
(in thousands, except Adjusted ARPPU, ARPPU and ARPU)
|
| |
Three Months
Ended
September 30,
2022
|
| |
Three Months
Ended
September 30,
2021
|
| |
Nine Months
Ended
September 30,
2022
|
| |
Nine Months
Ended
September 30,
2021
|
|
Key Operating Metrics
|
| |
|
| |
|
| |
|
| |
|
|
Paying Users
|
| |
815
|
| |
611
|
| |
768
|
| |
577
|
|
Adjusted Average Direct Revenue per Paying User
|
| |
$17.67
|
| |
$16.66
|
| |
$17.12
|
| |
$15.72
|
|
Average Direct Revenue per Paying User
|
| |
$17.67
|
| |
$16.66
|
| |
$17.12
|
| |
$15.55
|
|
Average Total Revenue per User
|
| |
$1.35
|
| |
$1.15
|
| |
$1.29
|
| |
$1.06
|
|
|
| |
Successor
|
| |
Predecessor
|
||||||
|
(in thousands, except Adjusted ARPPU, ARPPU and ARPU)
|
| |
Year ended
December 31,
2021
|
| |
Period from
June 11,
2020 to
December 31,
2020
|
| |
Period from
January 1,
2020 to
June 10,
2020
|
| |
Year ended
December 31,
2019
|
|
Key Operating Metrics
|
| |
|
| |
|
| |
|
| |
|
|
Paying Users
|
| |
601
|
| |
579
|
| |
601
|
| |
618
|
|
Adjusted Average Direct Revenue per Paying User
|
| |
$16.21
|
| |
$14.88
|
| |
$12.44
|
| |
$11.33
|
|
Average Direct Revenue per Paying User
|
| |
$16.08
|
| |
$12.76
|
| |
$12.44
|
| |
$11.32
|
|
Monthly Active Users
|
| |
10,799
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
|
Average Total Revenue per User
|
| |
$1.13
|
| |
N/A
|
| |
N/A
|
| |
N/A
|
|
($ in thousands)
|
| |
Three Months
Ended
September 30,
2022
|
| |
Three Months
Ended
September 30,
2021
|
| |
Nine Months
Ended
September 30,
2022
|
| |
Nine Months
Ended
September 30,
2021
|
|
Key Financial and Non-GAAP Metrics(1)
|
| |
|
| |
|
| |
|
| |
|
|
Revenue
|
| |
$50,402
|
| |
$38,249
|
| |
$140,487
|
| |
$100,812
|
|
Adjusted Direct Revenue
|
| |
$43,209
|
| |
$30,537
|
| |
$118,364
|
| |
$81,625
|
|
Indirect Revenue
|
| |
7,193
|
| |
7,712
|
| |
22,123
|
| |
20,079
|
|
Net income (loss)
|
| |
$(4,663)
|
| |
$1,894
|
| |
$(4,343)
|
| |
$(1,433)
|
|
Net income (loss) margin
|
| |
-9.3%
|
| |
5.0%
|
| |
-3.1%
|
| |
-1.4%
|
|
Adjusted EBITDA
|
| |
$24,034
|
| |
$20,492
|
| |
$65,778
|
| |
$53,698
|
|
Adjusted EBITDA Margin
|
| |
47.7%
|
| |
53.6%
|
| |
46.8%
|
| |
53.3%
|
|
Net cash provided by operating activities
|
| |
|
| |
|
| |
$36,794
|
| |
$18,852
|
|
|
| |
Successor
|
| |
Predecessor
|
||||||
|
($ in thousands)
|
| |
Year ended
December 31,
2021
|
| |
Period from
June 11,
2020 to
December 31,
2020
|
| |
Period from
January 1,
2020 to
June 10,
2020
|
| |
Year ended
December 31,
2019
|
|
Key Financial and Non-GAAP Metrics(1)
|
| |
|
| |
|
| |
|
| |
|
|
Revenue
|
| |
$145,833
|
| |
$61,078
|
| |
$43,385
|
| |
$108,698
|
|
Adjusted Direct Revenue
|
| |
$116,931
|
| |
$57,462
|
| |
$39,844
|
| |
$84,046
|
|
Indirect Revenue
|
| |
$29,802
|
| |
$11,810
|
| |
$3,545
|
| |
$24,698
|
|
Net income (loss)
|
| |
$5,064
|
| |
$(10,959)
|
| |
$(2,114)
|
| |
$7,706
|
|
Net income (loss) margin
|
| |
3.5%
|
| |
(17.9)%
|
| |
(4.9)%
|
| |
7.1%
|
|
Adjusted EBITDA
|
| |
$77,054
|
| |
$35,733
|
| |
$14,924
|
| |
$50,453
|
|
Adjusted EBITDA Margin
|
| |
52.8%
|
| |
58.5%
|
| |
34.4%
|
| |
46.4%
|
|
Net cash provided by operating activities
|
| |
$34,430
|
| |
$9,602
|
| |
$16,456
|
| |
$37,973
|
|
(1)
|
See “Management’s Discussion and Analysis of Financial Condition and Results of Operations of
Grindr—Non-GAAP Financial Measures” for additional information and a reconciliation of net income (loss) to Adjusted EBITDA and Adjusted EBITDA Margin and reconciliation of Direct Revenue to Adjusted Direct Revenue.
|
62
|
•
|
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 App. We calculate Paying Users as a monthly average, by counting the number of Paying Users in each month and then dividing by the number of months in the relevant measurement period. Paying Users is a primary metric that we
use to judge the health of our business and our ability to convert users to purchasers of our premium features. We are focused on building new products and services and improving on existing products and services, as well as launching new
pricing tiers and subscription plans, to drive payer conversion.
|
|
•
|
ARPPU. We calculate ARPPU based on Direct Revenue in any measurement period, divided by Paying Users in such a period divided
by the number of months in the period.
|
|
•
|
Adjusted ARPPU. We calculate adjusted ARPPU based on Adjusted Direct Revenue (excluding purchase accounting adjustments) in any
measurement period, divided by Paying Users in such a period divided by the number of months in the period.
|
|
•
|
MAUs. A MAU, or Monthly Active User, is a unique device that demonstrated activity on the Grindr App over the course of the
specified period. Activity on the app is defined as opening the app, chatting with another user, or viewing the cascade of other users. We also exclude devices where all linked profiles have been banned for spam. We calculate MAUs as a
monthly average, by counting the number of MAUs in each month and then dividing by the number of months in the relevant period. We use MAUs to measure the number of active users on our platform on a monthly basis and to understand the
pool of users we can potentially convert to Paying Users. We revised our MAU calculation method in November 2020. For periods prior to this, our ability to accurately validate the newly defined metric is restricted by privacy related data
retention policies; therefore, MAU is not presented for any periods prior to 2021.
|
|
•
|
ARPU. We calculate ARPU based on Total Revenue in any measurement period, divided by our MAUs in such a period divided by the
number of months in the period. As we expand our monetization product offerings, develop new verticals, and grow our community of users, we believe we can continue to increase our ARPU.
|
Non-GAAP Profitability
We use net income (loss) and net cash provided by operating
activities to assess our profitability and liquidity, respectively. In addition to net income (loss) and net cash provided by operating activities, we also use the following measure:
|
•
|
Adjusted EBITDA. We define Adjusted EBITDA as net income (loss) excluding income tax provision, interest expense, depreciation
and amortization, stock-based compensation expense, non-core expenses/losses (gains). Non-core expenses/losses (gains) include purchase accounting adjustments related to deferred revenue, transaction-related costs, asset impairments,
management fees, and interest income from the related party loan to Catapult GP II. Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenue.
|
|
•
|
Adjusted Direct Revenue. We define Adjusted Direct Revenue as Direct Revenue adjusted for the release of the fair value
adjustment of deferred revenue into revenue of the acquired deferred revenue due to the June 10, 2020, acquisition (See Note 3 to Legacy Grindr’s audited consolidated financial statements beginning on page F-86 of this
prospectus for additional information).
|
Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Direct Revenue
are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted EBITDA, Adjusted EBITDA Margin and Adjusted Direct Revenue are helpful to investors, analysts, and
other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors, and other
interested parties to evaluate and assess performance.
See “Management’s Discussion and
Analysis of Financial Condition and Results of Operations of Non-GAAP Financial Measures” for additional information and a reconciliation of net income (loss) to Adjusted EBITDA and Adjusted EBITDA Margin and reconciliation of Direct
Revenue to Adjusted Direct Revenue.
63
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 the section titled “Risk Factors”
of this prospectus.
Growth in User Base and Paying Users
We acquire new users through investments in marketing and brand as
well as through word of mouth from existing users and others. We convert these users to Paying Users by introducing premium features which maximize the probability of developing meaningful connections, improve the experience, and provide more
control. For the three months ended September 30, 2022 and 2021, we had over 815 thousand and 611 thousand Paying Users, respectively, representing an increase of 33.3% period over period and for the nine months ended September 30, 2022 and 2021,
we had over 768 thousand and 577 thousand Paying Users, respectively, representing an increase of 33.1% 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 in-app offerings. As we scale and our community grows larger, we are able to facilitate more meaningful interactions as a result of the wider selection of potential connections. This in turn increases our brand awareness and increases
conversion to one of our premium products and services. Our revenue growth primarily 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.
Expansion into New Geographic Markets
We are focused on growing our platform globally, including through
entering new markets and investing in under-penetrated markets. Expanding into new geographies will require increased costs related to marketing, as well as localization of product features and services. Potential risks to our expansion into new
geographies will include competition and compliance with foreign laws and regulations. As we expand into certain new geographies, we may see an increase in users who prefer to access premium features through our add-on options rather than through
our subscription packages, which could impact our ARPPU. We may also see a lower propensity to pay as we enter certain new markets with additional competitors and cost and revenue profiles.
Growth in ARPPU
We have developed a sophisticated understanding of the value our
users derive from becoming Paying Users on our platform. We continually 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 the number of Paying Users, mix of monetization offerings on our platform, effect of demographic shifts, geographic differences on all of these variables, and changes in mobile app store policies. Our pricing is in local currency
and may vary between markets. As foreign currency exchange rates change, translation of the statements of operations into U.S. dollars 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 Paying Users.
Investing in Growth While Driving Long-Term
Profitability
Key investment areas for our platform include machine learning
capabilities, including continually improving our technology; features that prioritize security and privacy; and new premium offerings that add incremental value to Paying Users.
Attracting and Retaining Talent
Our business relies on our ability to attract and retain our talent,
including engineers, data scientists, product designers and product developers. As of September 30, 2022, we had over 183 full-time employees; of which employees, approximately 57% work in engineering and product development. We believe that
people want to work at a company that has purpose and aligns with their personal values, and therefore our ability to recruit talent is aided by our mission and brand reputation. We compete for talent within the technology industry.
64
Impact of COVID-19
In March 2020, the World Health Organization declared the
Coronavirus Disease 2019 (“COVID-19”) a global pandemic. The COVID-19 outbreak has reached across the globe, resulting in the implementation of significant governmental measures, including lockdowns,
closures, quarantines, and travel bans intended to control the spread of the virus. While some of these measures have been relaxed over the past few months in certain parts of the world, ongoing social distancing measures, and future prevention
and mitigation measures, as well as the potential for some of these measures to be reinstituted in the event of repeat waves of the virus, are likely to have an adverse impact on global economic conditions and consumer confidence and spending,
and could materially adversely affect demand, or users’ ability to pay, for our products and services. In response to the COVID-19 outbreak, we have taken several precautions that may adversely impact employee productivity, such as requiring
employees to work remotely, imposing travel restrictions, and temporarily closing office locations. We continue to monitor the rapidly-evolving situation and guidance from international and domestic authorities, including federal, state and local
public health authorities, and there may be developments outside our control requiring us to adjust our operating plan. As such, given the unprecedented uncertainty around the duration and severity of the impact on market conditions and the
business environment, we cannot reasonably estimate the full impacts of the COVID-19 pandemic on our operating results in the future. We believe the COVID-19 pandemic was a factor that suppressed user activity, particularly between March 2020 to
July 2020, when in-person engagement across the markets in which we operate was severely impacted, and caused some users to be less active or cancel their subscriptions. For additional information, see the section titled “Risk Factors” of this prospectus.
Factors Affecting the Comparability of Our Results
General economic trends. General economic trends and conditions, including demographic changes, employment rates, job growth, user confidence, and disposable income, have a substantial effect on both our users’ ability
and desire to purchase premium subscriptions and advertisers’ ability and willingness to advertise on our network, thereby affecting both of our major revenue streams and our financial results over time and the year-over-year comparability of
operating results.
Governmental regulations. New governmental policies and regulations can affect our business in meaningful ways, even when such policies and regulations are not specifically related to the LGBTQ community. For example,
the implementation of GDPR in Europe has given end-users more control over how their data and personal information are utilized and has thereby adversely affected our European advertisers’ ability to specifically target these users. This new
regulation has had a stagnating effect on our indirect revenue growth trajectory in Europe. The implementation of similar regulations in other regions of the world, or new regulations that affect our ability to monetize the data received from
our users, could have a significant impact on our operating results and ability to grow our business.
Temporary variability in
general advertising spend. Our ability to maintain consistently high advertiser demand for our platform can be affected by seasonal or 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 could have a significant impact on the financial condition of our business.
International market pricing
and changes in foreign exchange rates. The Grindr App has MAUs in over 190 countries and territories. Our international revenues represented 38.3%, 37.5%, 35.8%, 42.7%, and 36.7% of total
revenue for the three and nine months ended September 30, 2022, the year ended December 31, 2021, combined Successor 2020 Period and Predecessor 2020 Period, and the year ended December 31, 2019, respectively. We vary our pricing to align with
local market conditions and our international businesses typically earn revenues in local currencies. In addition, some of the parties 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
Revenues
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
65
features. Indirect Revenue is generated by third parties who pay us for access to
our users, such as advertising and partnerships. As we continue to expand and diversify our revenue streams, we anticipate increasing monetization from premium add-ons, contributing to increase in revenues over time.
Direct Revenues. Direct Revenues are reported gross of fees for subscriptions and premium add-ons as we are the primary party obligated in our transactions with customers and therefore, we act as the principal. Our subscription revenues are generated
through the sale of monthly subscriptions that are currently offered in one, three, six and twelve-month subscription periods. Subscribers pay in advance, primarily through third party partners, including iTunes, Google Play, and Stripe,
according to our terms and conditions. Subscription revenues, net of taxes and chargebacks, are recognized on a monthly basis over the term of the subscription.
Indirect Revenues. Indirect Revenues primarily consists of revenue generated by third parties who pay us for access to our users, including advertising, partnerships, and merchandise. Our advertising business provides advertisers with the unique
opportunity to directly target and reach the LGBTQ community, which generally consists of well-educated individuals with significant global purchasing power. We have attracted advertisers from a diverse array of industries, including
healthcare, gaming, travel, automotive, and consumer goods. We offer a diverse range of advertising initiatives to advertisers, such as in-app banners, full-screen interstitials, rewarded video, and other customized units, typically on a CPM
basis. We contract with a variety of third-party ad platforms to market and sell digital and mobile advertising inventory on our Grindr App. In exchange for facilitating the advertising process, we pay the relevant third-party ad platform a
share of the revenue derived from the advertisements they place on the Grindr App.
Cost of Revenue and Operating Expenses
Cost of Revenue.
Cost of revenue consists primarily of the distribution fees which we pay to Apple and Google, infrastructure costs associated with supporting the Grindr App and our advertising efforts, which stem largely from our use of Amazon Web Services,
and costs associated with content moderation, which involve our outsourced teams in Honduras and the Philippines ensuring that users are complying with our community standards.
Selling, General, and Administrative Expenses. Selling, general and administrative expenses consists primarily of sales and marketing expenditures, compensation and other employee-related costs for our employees, costs related to outside consultants and general
administrative expenses, including for our facilities, information technology and infrastructure support. We plan to continue to expand sales and marketing efforts to attract new users, retain existing users and increase monetization of both
our new and existing users. It also includes the expense from settlement of vested incentive units consisting of cash payments associated with closing out prior incentive plans and transitioning to new incentive plans in connection with
Kunlun’s acquisition of our equity interests in 2016 and 2018. Such cash payments were based upon the value of the vested incentive units at the time of settlement.
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, features, and related
technology.
Depreciation and Amortization. Depreciation is primarily related to computers, equipment, furniture, fixtures, and leasehold improvements. Amortization is primarily related to capitalized software, acquired intangible assets (customer
relationships, technology, etc.) as well as trademarks, patents, and copyrights.
Other (Expense) Income
Interest (Expense) Income, Net. Interest (expense) income, net consists of interest income received on related party loans and interest expense incurred in connection with our long-term debt.
Other Income (Expense), Net. Other income (expense), net consists of realized exchange rate gains or losses, unrealized exchange rate gains or losses, charitable contributions.
Income Tax Provision (Benefit). Income tax provision (benefit) represents the income tax expense associated with our operations based on the tax laws of the jurisdictions in which we operate. Foreign jurisdictions have different statutory tax
rates than the United States. Our effective tax rates will vary depending on the relative proportion of foreign to domestic income, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws.
66
Results of Operations
Year Ended December 31, 2021
Compared to the Period from June 11, 2020 to December 31, 2020 (Successor) and the Period from January 1, 2020 to June 10, 2020 Compared to the Year Ended December 31, 2019 (Predecessor)
|
Results of Operations
|
| |
Successor
|
| |
Predecessor
|
||||||||||||||||||
|
($ in thousands)
|
| |
Year ended
December 31,
2021
|
| |
% of
Total
Revenue
|
| |
Period from
June 11,
2020 to
December 31,
2020
|
| |
% of
Total
Revenue
|
| |
Period from
January 1,
2020 to
June 10,
2020
|
| |
% of
Total
Revenue
|
| |
Year
ended
December 31,
2019
|
| |
% of
Total
Revenue
|
|
Consolidated Statements
of Operations and Comprehensive Income (Loss)
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Revenues
|
| |
$145,833
|
| |
100.0%
|
| |
$61,078
|
| |
100.0%
|
| |
$43,385
|
| |
100.0%
|
| |
$108,698
|
| |
100.0%
|
|
Operating costs and expenses
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Cost of revenue (exclusive of depreciation and amortization
shown separately below)
|
| |
37,358
|
| |
25.6%
|
| |
18,467
|
| |
30.2%
|
| |
12,954
|
| |
29.9%
|
| |
27,545
|
| |
25.3%
|
|
Selling, general and administrative expenses
|
| |
30,618
|
| |
21.0%
|
| |
15,671
|
| |
25.7%
|
| |
15,583
|
| |
36.0%
|
| |
32,573
|
| |
30.0%
|
|
Product development expense
|
| |
10,913
|
| |
7.5%
|
| |
7,278
|
| |
11.9%
|
| |
7,136
|
| |
16.4%
|
| |
11,059
|
| |
10.2%
|
|
Depreciation and amortization
|
| |
43,234
|
| |
29.6%
|
| |
17,639
|
| |
28.9%
|
| |
10,642
|
| |
24.5%
|
| |
27,412
|
| |
25.2%
|
|
Total operating costs and expenses
|
| |
122,123
|
| |
83.7%
|
| |
59,055
|
| |
96.7%
|
| |
46,315
|
| |
106.8%
|
| |
98,589
|
| |
90.7%
|
|
Income (loss) from operations
|
| |
23,710
|
| |
16.3%
|
| |
2,023
|
| |
3.3%
|
| |
(2,930)
|
| |
-6.8%
|
| |
10,109
|
| |
9.3%
|
|
Other (expense) income
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
| |
|
|
Interest (expense) income, net
|
| |
(18,698)
|
| |
-12.8%
|
| |
(15,082)
|
| |
-24.7%
|
| |
277
|
| |
0.6%
|
| |
386
|
| |
0.3%
|
|
Other income (expense), net
|
| |
1,288
|
| |
0.9%
|
| |
142
|
| |
0.2%
|
| |
(76)
|
| |
-0.2%
|
| |
(348)
|
| |
-0.3%
|
|
Total other (expense) income
|
| |
(17,410)
|
| |
-11.9%
|
| |
(14,940)
|
| |
-24.5%
|
| |
201
|
| |
0.4%
|
| |
38
|
| |
—%
|
|
Net income (loss) before income tax
|
| |
6,300
|
| |
4.3%
|
| |
(12,917)
|
| |
-21.1%
|
| |
(2,729)
|
| |
-6.3%
|
| |
10,147
|
| |
9.3%
|
|
Income tax provision (benefit)
|
| |
1,236
|
| |
0.8%
|
| |
(1,958)
|
| |
-3.2%
|
| |
(615)
|
| |
-1.4%
|
| |
2,441
|
| |
2.2%
|
|
Net income (loss) and comprehensive income
(loss)
|
| |
$5,064
|
| |
3.5%
|
| |
$(10,959)
|
| |
-17.9%
|
| |
$(2,114)
|
| |
-4.9%
|
| |
$7,706
|
| |
7.1%
|
|
Net income (loss) per share
|
| |
$0.05
|
| |
|
| |
$(0.11)
|
| |
|
| |
$(0.02)
|
| |
|
| |
$0.08
|
| |
|
Revenues
Revenues for the year ended December 31, 2021, Successor 2020
Period, and Predecessor 2020 Period were $145.8 million, $61.1 million, and $43.4 million, respectively. The $41.3 million increase, or 39.5% growth rate, for the year ended December 31, 2021 compared to the combined Successor 2020 Period and
Predecessor 2020 Period was due to an increase in Direct Revenue of $26.9 million, or 30.2%, to $116.0 million and an increase in Indirect Revenue of $14.4 million, or 94.1%, to $29.8 million. The increase in Direct Revenue was driven by both an
increase in ARPPU and Paying Users. ARPPU increased by 27.3%, or $3.46, to $16.08 in 2021 from $12.63 in the combined Successor 2020 Period and Predecessor 2020 Period. Our ARPPU increased as we improved product mix with growth in our Unlimited
tier and optimized pricing on legacy plans during the year ended December 31, 2021. Adjusted Direct Revenue was $116.9 million and Adjusted ARPPU was $16.21 for the year ended December 31, 2021. In 2021, Paying Users increased by 13 thousand to
601 thousand, from 588 thousand in the combined Successor 2020 Period and Predecessor 2020 Period, as we released new monetization features for our subscription plans. The increase in Indirect Revenue was primarily drive by year-over-year growth
in advertising revenue. In January 2020, one of our third-party advertising partners, MoPub (recently acquired by Applovin), temporarily suspended our partnership due to a negative report concerning our data policies. In response to this, we
worked with MoPub to address these concerns and the partnership was reinstated in mid-2020. Since then, our Indirect Revenue has rebounded, contributing to the year-over-year increase in 2021. COVID-19 adversely affected our business for part of
2021 and most of 2020. Given the 2020 acquisition by San Vicente and the impact of COVID-19, we took the opportunity to
67
focus our efforts internally by reassessing strategic priorities, updating our
technology infrastructure, upgrading our data systems, stabilizing our product, and optimizing our cost structure. The result was to position the company for significant revenue growth in 2021 and a business better positioned for future growth.
See the section titled “Risk Factors” of this prospectus.
Revenues for the Successor 2020 Period, Predecessor 2020 Period, and
year ended December 31, 2019 were $61.1 million, $43.4 million, and $108.7 million, respectively. The decrease for the combined Successor 2020 Period and Predecessor 2020 Period compared to the year ended December 31, 2019 of $4.2 million, or
(3.9)%, was due to an increase of $5.1 million, or 6.1%, in Direct Revenue to $89.1 million and a decrease of $9.3 million, or 37.8%, in Indirect Revenue to $15.4 million. The increase in Direct Revenue was primarily due to an increase in ARPPU,
associated with a favorable shift in mix of premium tier Paying Users. In the combined Successor 2020 Period and Predecessor 2020 Period, ARPPU increased by 11.5%, or $1.30, to $12.63 from $11.33 in 2019. Adjusted Direct Revenue was $97.3 million
and Adjusted ARPPU was $13.79 for the combined Successor 2020 Period and Predecessor 2020 Period. The increases in Adjusted ARPPU and in ARPPU were partially offset by a decrease in Paying Users of 30 thousand to 588 thousand in the combined
Successor 2020 Period and Predecessor 2020 Period. COVID-19 had a much larger impact on our lower priced tier, XTRA, user base. The decrease in Indirect Revenue was primarily driven by year-over-year decline in advertising revenue, which was due
to the MoPub suspension discussed in the previous paragraph.
Revenues from operations in the United States increased by
$33.7 million, or 56.3%, in the year ended December 31, 2021 as compared to the combined Successor 2020 Period and Predecessor 2020 Period. During this same period, revenues from operations in the United Kingdom increased by $1.4 million, or
15.6%, and revenues from operations in the remainder of the world increased by $6.2 million, or 17.6%. These changes are consistent with revenue changes previously noted.
Revenues from operations in the United States decreased by
$8.9 million, or (12.9)%, in the combined Successor 2020 Period and Predecessor 2020 Period as compared to the year ended December 31, 2019. During this same period, revenues from operations in the United Kingdom increased by $0.3 million, or
3.6%, and revenues from operations in the remainder of the world increased by $4.3 million, or 13.9%. These changes are consistent with revenue changes previously noted.
Cost of revenue
Cost of revenue for the year ended December 31, 2021, Successor 2020
Period, and Predecessor 2020 Period were $37.4 million, $18.5 million, and $13.0 million, respectively. Cost of revenue increased by $5.9 million, or 18.7%, in the year ended December 31, 2021 as compared to the combined Successor 2020 Period and
Predecessor 2020 Period. This increase was primarily due to growth in distribution fees (consistent with direct revenue growth) and increased infrastructure costs associated with our primary information systems vendors.
Cost of revenue for the Successor 2020 Period, Predecessor 2020
Period, and year ended December 31, 2019 were $18.5 million, $13.0 million, and $27.5 million, respectively. Cost of revenue increased by $4.0 million, or 14.5%, in the combined Successor 2020 Period and Predecessor 2020 Period as compared to the
year ended December 31, 2019. This increase was primarily due to growth in distribution fees and infrastructure costs.
Selling, general and administrative expense
Selling, general and administrative expense for the year ended
December 31, 2021, Successor 2020 Period, and Predecessor 2020 Period were $30.6 million, $15.7 million, and $15.6 million respectively. Selling, general and administrative expenses decreased $0.7 million, or (2.2)%, in the year ended
December 31, 2021 as compared to the combined Successor 2020 Period and Predecessor 2020 Period, primarily due to lower user acquisition spend and decreased contractor expenses. These decreases were partially offset by increased full-time
employee-related expenses associated with headcount growth.
Selling, general and administrative expense for the Successor 2020
Period, Predecessor 2020 Period, and year ended December 31, 2019 were $15.7 million, $15.6 million, and $32.6 million respectively. Selling, general and administrative expense decreased $1.3 million, or (4.0)%, in the combined Successor 2020
Period and Predecessor 2020 Period, as compared to the year ended December 31, 2019 primarily due to lower office, travel, and other general administrative expenses, as a result of the COVID-19 lockdown.
68
Product development expense
Product development expense for the year ended December 31, 2021,
Successor 2020 Period, and Predecessor 2020 Period were $10.9 million, $7.3 million, and $7.1 million, respectively. Product development expense decreased $3.5 million, or (24.3)%, in the year ended December 31, 2021 as compared to the combined
Successor 2020 Period and Predecessor 2020 Period, due to lower contractor expenses, partially offset by increased full-time employee-related expenses.
Product development expense for the Successor 2020 Period,
Predecessor 2020 Period, and year ended December 31, 2019, were $7.3 million, $7.1 million, and $11.1 million, respectively. Product development expense increased $3.3 million, or 29.7%, in the combined Successor 2020 Period and Predecessor 2020
Period, as compared to the year ended December 31, 2019, due to higher employee and contractor related expenses.
Depreciation and amortization
Depreciation and amortization for the year ended December 31, 2021,
Successor 2020 Period, and Predecessor 2020 Period were $43.2 million, $17.6 million, and $10.6 million, respectively. Depreciation and amortization increased $15.0 million, or 53.2%, in the year ended December 31, 2021 as compared to the
Successor 2020 Period and Predecessor 2020 Period, primarily due to an increase in acquired intangibles amortization due to the acquisition in June 2020, as certain customer related intangible assets were amortized under an accelerated
amortization schedule, with higher amounts expensed in 2021 compared to the Successor 2020 Period and Predecessor 2020 Period combined. This increase was partially offset by a decrease in intangible impairment expense.
Depreciation and amortization for the Successor 2020 Period,
Predecessor 2020 Period, and year ended December 31, 2019 were $17.6 million, $10.6 million, and $27.4 million respectively. Depreciation and amortization increased $0.8 million, or 2.9%, in the combined Successor 2020 Period and Predecessor 2020
Period, as compared to the year ended December 31, 2019, primarily due an increase in intangible asset impairment expense which resulted in less amortization for the year ended December 31, 2019. This decrease was partially offset by an increase
in acquired intangible amortization expense.
Interest (expense) income, net
Interest income for the year ended 2021 primarily relates to a
$30 million promissory note from Catapult GP II in conjunction with the common units purchased on April 27, 2021. Total promissory note bears interest at 10.0% per annum. Total amount of interest income related to the note for the successor year
ended December 31, 2021 was $2.0 million. Interest income during the Predecessor period 2020 and year ended December 31, 2019 was $0.3 million, and $0.4 million, respectively, primarily related to interest earned on a $14.0 million loan to Kunlun
bearing an interest rate of 2.0% per annum. See Note 9 and Note 17 to Legacy Grindr’s audited consolidated financial statements beginning on page F-93 and F-105, respectively, of this prospectus for
additional information.
Interest expense relates primarily to the $192.0 million credit
agreement entered into in the Successor 2020 Period. Total amount of interest expense related to the credit agreement for the successor year ended December 31, 2021 and Successor 2020 Period was $20.7 million and $15.1 million respectively. See
Note 1 to Legacy Grindr’s audited consolidated financial beginning on page F-74 of this prospectus for additional information.
Interest (expense) income, net for the year ended December 31, 2021,
Successor 2020 Period, and Predecessor 2020 Period were $(18.7) million, $(15.1) million, and $0.3 million, respectively.
Interest (expense) income, net increased by $3.9 million in the year
ended December 31, 2021 as compared to the combined Successor 2020 Period and Predecessor 2020 Period, primarily due to the additional interest expense associated with raising $192.0 million in debt June 2020. The higher interest expense was
partially offset by an increase in interest income associated with a loan arrangement.
Interest (expense) income, net for the Successor 2020 Period,
Predecessor 2020 Period, and year ended December 31, 2019 were $(15.1) million, $0.3 million, and $0.4 million, respectively. Interest (expense) income, net changed by $15.2 million from interest expense, net in the combined Successor 2020 Period
and Predecessor 2020 Period to interest income, net during the year ended December 31, 2019, primarily due to greater interest expense associated with raising $192.0 million in debt June 2020.
69