Bumble Q3 2023 Earnings Call Transcript

Quartr
Provided by Quartr
November 7, 2023

There are 13 speakers on the call.

Operator

Thank you for joining. My name is Danica. I will be your conference operator today. At this time, I would like to welcome everyone to the Bumble Third Quarter 2023 Financial Results Conference Call. All lines have been placed on mute to prevent any background noise.

Operator

After the speakers' remarks, there will be a question and answer session. I would now like to turn the call over to Cheryl Valenzuela, VP of Investor Relations. Please go ahead.

Speaker 1

Financial Results. With me today are Whitney Wolfe Herd, Founder and CEO and Anoush Dharmanyan, CFO of Bumble. Before we begin, I'd like to remind everyone that certain statements made on this call today and Forward Looking Statements. These forward looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, We undertake no obligation to revise any statement to reflect changes that occur after this call.

Speaker 1

Descriptions of factors and risks that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our earnings press release and filings with the SEC, including our annual report on Form 10 ks for the year ended December 31, 2022, and our subsequent periodic filings. During the call, we also refer to certain non GAAP financial measures. These non GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at ir. Bumble.com.

Speaker 1

And with that, I'll turn it over to Vicky.

Speaker 2

Thank you, Cheryl. Good afternoon, everyone. Thanks for joining our call today. Before we dive into our Q3 results, I want to spend a moment on the exciting announcement we made yesterday regarding the future of Bumble Inc. Leadership.

Speaker 2

Lidiani Jones, who currently serves as Chief Executive Officer at Slack and has more than 2 decades of experience as a product, technology and business leader will join Bumble Inc. As our next CEO, effective January 2, 2024. At that time, I will transition to the role of Executive Chair. This announcement is a monumental moment in Bumble Inc. Evolution and is the result of a thoughtful and deliberate succession planning process.

Speaker 2

The Board and I have thought hard about what type of leader could ultimately step into the CEO role as a successor to me and help taking help continue to take Bumble Inc. To even greater heights. We were thrilled to find someone with Lidiani's background, passion and values to propel Bumble's forward. Having her leading this next chapter of Bumble Inc. Is a major win for our company, members, team and shareholders.

Speaker 2

For me, the last decade taking Bumble from just an idea to a publicly traded company has been incredibly rewarding and fulfilling. I founded this company to empower women to make the first move. Now after more than a 1,000,000,000 first moves and countless success stories, I am ready and excited to make the next move. I am stepping forward into the executive chair role, allowing me to get back to my founder roots and bring immense passion and focus to this next phase of Bumble's growth. I believe in Bumble Inc.

Speaker 2

Significant potential today more than ever before and I am incredibly optimistic about the future. In this next chapter, we will continue to work towards our North Star, our mission of creating healthy and equitable relationships through kind connections. How we do this is with continued focus on our top three priorities, customer, techaI and brand. Starting with customer, we have always been and will continue to be a customer first Company, which means that everything we do is to maximize success for our members. We are focused on customer pain points.

Speaker 2

We build on what is working for them and continuously innovate to improve their experience and strive to keep our customers safe. Trust and safety is by design, not an afterthought. Our second focus is on tech and AI. We leveraged data, machine learning, next gen tech and now increasingly generative AI to innovate and build for the next horizon of growth and impact. Our customer base and the associated unique data set we have built up over many years allows us to deliver relevance and value to our customers in unique and meaningful ways.

Speaker 2

We are committed to integrating AI where possible into every step of the user journey beyond what we've already been doing for years via our algorithms. And finally, but very importantly, our brand. It's what drives loyalty and creates the network effects that lead to both top of funnel growth as well as bottom line results. Our brand helps us propel our mission and make a positive impact in the world. By focusing on these priorities, I believe we are well positioned for the future of relationships.

Speaker 2

To underscore the confidence we have in our long term business trajectory, We are announcing that our Board of Directors has increased our existing stock repurchase program authorization from $150,000,000 to 300,000,000 Now moving on to our results. In Q3, our continued execution against our strategic objectives delivered strong financial performance across both top line and profitability. Across both Bumble and Badu, we gained download share on a global basis and also saw accelerations in sequential paying users, demonstrating our continued ability to grow our footprint across the world. Total Bumble Inc. Revenue this quarter increased 18% year over year to $276,000,000 and adjusted EBITDA reached $75,000,000 representing an adjusted EBITDA margin of 27%.

Speaker 2

Bumble Apps Q3 revenue grew 23 percent to $222,000,000 driven by continued momentum in paying users, which were $2,600,000 up 25 percent year over year. From Q2 to Q3, We added 147,000 payers, an increase from the prior three quarters. Our growth is driven by our sharp focus on the customer. We are making great strides on product innovation, further international expansion and continued focus on building a trusted and safe Brand for Women. Our product shipping velocity is stronger than ever and we are pleased with our progress on this front this year.

Speaker 2

Our goal remains to enhance the core experience and explore new discovery and engagement models that are designed to reduce friction and emphasize efficiency, safety, kindness and compatibility in the matching to meeting process. Our goal is to get people online to go offline. With respect to new features, revenue contribution from newer releases such as Compliments and Best Bees continues to ramp. As a reminder, compliments is our message before match offering that encourages kindness and positive connections. Well Best Bees is our AI powered match curation tool, showing you the people who are most compatible for you and is currently included on our Bumble premium subscription tier.

Speaker 2

Q3 marked a meaningful step up in complements revenue with positive user reaction from recent changes designed to drive greater awareness, visibility and payer conversion. We are also seeing improved activity and revenue metrics for Best Buy. As we mentioned last quarter, we are excited to be introducing 2 new subscription tiers for our members. These will not only enhance our current offerings, but also enable us to better and more directly serve the needs of our high intent, Sirius Dating Customers and Gen Z users. Our higher tier, which will be called Premium Plus aims to elevate our Power members dating experience to improve their chances for a match.

Speaker 2

Premium Plus is actively being tested in several countries with promising initial results. Our lower priced tier is also currently in limited testing. This tier is focused on helping our younger members express their personalities on a deeper level and find connection in fun and social ways. Our goal is to expand testing and launch both tiers in coming quarters. As always, We augment these new features with under the hood optimizations that are meaningful in improving the user experience.

Speaker 2

In Q3, These included improvements in our machine learning algorithms, our recommendation engine, which have all resulted in increases in relevance and metrics with strong positive impact on user experience, especially for women. In addition to product innovation, A key focus area for Bumble app has been to grow its reach internationally. In Western Europe, we saw robust user payer and revenue growth. We remained the number 2 dating app in Germany and we gained download share in markets such as Austria, France, Switzerland and the Netherlands. Our Latin America and Asia expansion is also performing well, demonstrating the broad global appeal of our brand and product.

Speaker 2

Now turning to our other app. Badu app and other revenue totaled $54,000,000 in Q3, up 3% year over year. This marks 2 consecutive quarters of year on year revenue growth and sequential net ad growth for BIDU, which is an exciting and encouraging milestone. We also continue to see improving trends across many metrics, including global registrations, monthly active users and engagement. As we plan for 2024, we are excited to build on this momentum with a brand and identity refresh aimed at improving awareness in key markets, especially among our women users.

Speaker 2

We intend to supplement this with targeted marketing campaigns showcasing Baidu's vision of becoming the app of confidence in 2024, enabling its highly loyal user base to express and be their real selves in a safe and trusted environment. Outside of Baidu, we continue to be pleased with the performance of fruit. Its recent launch in the UK is the first step in its expansion into Small Market. Our product focus continues to be around Gen Z engagement and monetization. With the recent launch of weekly subscriptions, addition of new features behind the paywall and progress of revenue optimizations.

Speaker 2

Now, moving on to the opportunity beyond dating. BFF or Bumble for Friends, the standalone app has now been rolled out in several markets, including the U. S. Downloads for the standalone app have been strong and we are excited by the growth that we've seen so far for MAU, engagement and retention, particularly with Gen Z Women. As we look ahead, our near term focus areas are on future development, in particular around groups and communities and driving greater awareness.

Speaker 2

In Q3, we leveraged our strength in back to school programming to increase U. S. College student awareness and we intend to continue this in Q4 via partnerships that center on celebrating friends and communities during the holiday season. In closing, we are making excellent progress on our priorities and building momentum across our business. The execution of our strategy is driving results and is a testament to our team's hard work and dedication, which is enabling us to deliver for our users and shareholders in ways no one else can.

Speaker 2

I'd like to conclude as always by extending my deep gratitude and appreciation to all of our employees and to all of our customers, partners and investors for their continued trust and support. I cannot express how deeply grateful I am to have had the opportunity and privilege to lead as Bumble's CEO for all of these years. And I look forward to stepping forward into this next role as Executive Chair. None of this would be possible without you, team Bumble. So with that, onwards and thank you so much.

Speaker 2

I will now turn it over to Anu for a discussion of our financial results and outlook.

Speaker 3

Thank you, Whitney, and congratulations on stepping forward into the exec chair role. I look forward to partnering with you on a seamless transition and welcoming Lidiani to Bumble over the next few months. And good afternoon, everyone. Our 3rd quarter results reflected continued progress on our strategic priorities across our family of apps. We achieved strong revenue growth while operating with discipline to deliver strong margins and cash flows.

Speaker 3

As I walk you through our results, please note that understated otherwise, all growth comparisons are on a year over year basis. I'll discuss Q3 before turning to our outlook for Q4 and full year 2023, and I will conclude with a preliminary view for full year 2024. Total revenue for Bumble Inc. Reached $276,000,000 up 18%. FX benefit was $2,000,000 lower than what we had assumed at the time of our prior guidance.

Speaker 3

Both paying users and our people contributed to revenue growth with total paying users increasing 16 percent to 3,800,000 and total ARPPU increasing 2% to $23.42 Revenue from Bumble app was $222,000,000 up 23%. Bumble app paying users grew 25 percent to 2,600,000 adding 147,000 net adds sequentially. Growth in paying users was driven by both strength in monthly active users as well as payer penetration gains in many key markets. Bumble apps ARPPU was $28.38 down 2% year over year, but up 1% on a sequential basis. The year over year decline was primarily driven by geographic mix shift, partially offset by pricing optimization.

Speaker 3

Now moving on to Badoo App and Other. Badoo App and Other revenue was $54,000,000 up 3%. Badu App and other paying users, excluding fruit and official, grew 1% to 1,200,000. On a sequential basis, Baidu paying users increased by 40,000. Baidu app and other ARPPU, excluding fruits and official, was flat at $12.79 Turning now to expenses.

Speaker 3

Total GAAP costs and expenses were $246,000,000 for the quarter, up 20%. On a non GAAP basis, excluding stock based comp and other non cash or non recurring items, Our total non GAAP costs and expenses were $200,000,000 up 17%. Cost of revenue was $79,000,000 and grew 25%. As a percentage of revenue, cost of revenue was 29% versus 27% in the year ago period, mostly due to higher app store fees as a result of compliance with the Google Play mandate. Sales and marketing expenses grew 10% to $66,000,000 This represents 24% of revenue versus 26% in the year ago period.

Speaker 3

G and A expenses were $33,000,000 or 12% of revenue compared to 29,000,000 or 12% of revenue last year. Product development expenses were $22,000,000 or 8% of revenue versus $18,000,000 or 8% in the year ago period. We reported Q3 GAAP net earnings of $23,000,000 compared to $26,000,000 last year. We delivered adjusted EBITDA of $75,000,000 up 22% and representing a 27% adjusted EBITDA margin. This exceeded our guidance of $71,000,000 to $73,000,000 and reflects our ongoing commitment to financial discipline.

Speaker 3

While we continue to invest in growing our app, we remain disciplined on costs and are pleased with the progress towards our margin target for the full year. Turning now to the balance sheet. Our Q3 cash position remains healthy as we generated positive free cash flow of $69,000,000 We ended the quarter with cash and cash equivalents of $439,000,000 Our total debt position was $622,000,000 of which only 6 $1,000,000 is due over the next 12 months. Due to the leadership search in Q3, we did not buy back any shares during the quarter. Approximately $129,000,000 remains on our previously authorized share repurchase program, and today we announced an incremental authorization of $150,000,000 bringing the total buyback authorized to date to $300,000,000 with $279,000,000 remaining in aggregate.

Speaker 3

We are committed to resuming our buyback program and returning capital to our shareholders. Now moving on to our financial outlook for Q4 and full year 2023. While we continue to see strong trends in usage and monetization in general, As we look to the rest of the year, we are monitoring the current macroeconomic backdrop, including the war in the Middle East and the resumption of student loan repayment. Additionally, we are also seeing unfavorable trends on FX compared to our prior outlook. As a result, for Q4, we now expect the following: total revenue between $272,000,000 $278,000,000 representing a growth rate of 14% at the midpoint of the range.

Speaker 3

Our outlook assumes FX impact to be $6,000,000 worse than what we had assumed at the time of our prior guidance. Our outlook also assumes $1,000,000 of impact from the ongoing conflict in the Middle East, mostly in Bumble App. Bumble app revenue between $221,000,000 $225,000,000 representing a growth rate between 16% 18%. Our outlook assumes FX impact to be $4,000,000 worse than what we had assumed at the time of our prior guidance in addition to the impact from the conflict in Israel. With respect to paying users, we expect full year Bumble net adds of approximately 510,000 to 515,000, which implies approximately 75,000 sequential net adds for 4Q at the midpoint of the range.

Speaker 3

We expect Baidu sequential net adds to be flat to slightly positive in Q4. We expect Q4 adjusted between $72,000,000 $75,000,000 representing 27% margin at the midpoint of the range. For full year 2023, this translates to total revenue between $1,050,000,000 1.056 $1,000,000,000 representing a growth rate of 16% to 17%. This assumes in aggregate a $9,000,000 impact from worsening FX versus our prior guidance and the Israel conflict. Bumble app revenue to be between $845,000,000 $849,000,000 representing a growth rate of 22%.

Speaker 3

This assumes in aggregate a $6,000,000 total impact from worsening FX versus our prior guidance and the Israel conflict. For adjusted EBITDA, we maintain our expectation of at least 100 basis points of year over year margin expansion. As we look ahead to 2024, our fundamental strategy remains unchanged and we are very excited about the future of our business. We have an exceptional brand that is loved and used by nearly 4,000,000 paying users around the globe and growing. We have a strong product pipeline that leverages innovative technologies, while prioritizing safety for our users.

Speaker 3

We are just beginning to realize the potential of our apps, and we see tremendous opportunity to continue to expand our reach in more countries. As we work to refine our planning for next year, we expect another year of solid growth for our family of apps. At the same time, our preliminary outlook also takes into consideration the early stage of our planning process, our leadership succession plan, the trends we are seeing and expected headwinds from FX. As such, our initial assumptions for 2024 for total Bumble Inc. Year over year revenue growth rate to be at least in the low teens.

Speaker 3

This assumes approximately 150 basis As we finalize our investment priorities for next year, we will continue being disciplined on our spend. We expect full year adjusted EBITDA margin to band between 50 to 100 basis points next year. We will share a more comprehensive outlook in our next earnings call when we discuss Q4 results. Before I end, I'd like to echo Whitney's thanks to all our teams for their hard work in driving our business forward. And with that operator, we can open it up for Q and A.

Operator

Thank you. At this time, I would like to remind everyone in order to ask a question, press star then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q and A roster. Your first question comes from the line of Alexandra Steiger with Goldman Sachs. Please go ahead.

Speaker 4

Great. Thank you so much Maybe two questions on the transition here. First one on timing. Could you maybe elaborate a little bit more on the timing of the announcement? When you look at some factors inside the company versus outside, Why do you think this is the right time for you to make that move?

Speaker 4

And then second, listening to some interviews with Lidiani. It appears that she has a very valuable background in terms of AI and bringing AI features into existing products and services. To what extent is this going to be a focus for her at Bumble? And could it fast forward some of the AI initiatives you've laid out in the past few quarters? Thank you so much.

Speaker 2

Hi. So great to chat with you. Thank you for the question. So the short answer was, we didn't make this decision based on timing. This was about finding the right successor, the right leader.

Speaker 2

The Board and I have been focused on an extremely thoughtful and very deliberate succession plan for some time. And so finding the right leader was really the key. And you already touched upon just one of many of Lidiani's incredible strengths and we'll get into that in a moment. But I have to say, the short answer is with someone as remarkable as Lidiani and Keeping me engaged as the Executive Chair focused on my strength, leaning into my superpowers, right? I think, So many of the amazing efforts around our mission, our brand, our marketing, our social impact, our customers, those are things that I and deeply passionate about and do extremely well.

Speaker 2

So allowing me to move beyond the day to day and get into this founder mindset on behalf of Bumble Inc. You pair her with me, it's a remarkable I don't think people are fully recognizing how powerful that can be. So really ultimately it's going to allow us to both innovate, to drive growth across the business, drive new products. And now moving into your second question, let's just talk about Lydiani for a moment. So First and foremost, she is incredibly unique.

Speaker 2

She is not only wildly intelligent and capable. She has insane followership. I mean, her people that she has led love her. That was always going to be critical for a leader to be my successor. And then when you double click on her qualities and her experience, she is a software engineer.

Speaker 2

She speaks systems. She speaks the language of technology. She is going to get in there and be not only a technology mind, but an incredible product innovator. She is a customer first product person. If you look at the products she's worked on, these are products we love and adore.

Speaker 2

So with the note on AI, the short answer is yes. She is going to show up on day 1. We've been doing So much work on the back end of AI already, ranging from, I would call it, 3 main buckets, tools where we can integrate different AI tooling to enhance the customer experience to supercharge the under the hood efforts and then also drive efficiencies and drive strength as far as the leadership team and the broader teams go. The second bucket is really the non customer facing efforts that she's going to be leaning into. This is supercharging our algorithms, further enhancing our safety and moderation efforts.

Speaker 2

Using AI as this underpinning supercharged effort to bring the world closer together and to drive healthy relationships. And then the 3rd bucket is the customer facing stuff. This is what we're all reading about and thinking about all day. This is where generative AI comes in. She has done this.

Speaker 2

She knows this. It is natural and native to her. It's not something she needs to learn when she arrives. She will show up day 1 ready to roll. And so we're so excited about the opportunity, what this means for the member journey, the member experience.

Speaker 2

And we think this gives us a massive competitive edge. So with that, I hope you can hear it in my voice. I am in this to win this. She is so excited and I think we are going to embark on Bumble's most exciting chapter

Speaker 4

yet. Thank you and all the best again.

Operator

Okay. Your next question comes from Cory Carpenter with JPMorgan. Please go ahead.

Speaker 5

Thank you. I had 2. Just first, hoping you could expand on the macro impact that you're seeing. You called out student loan repayments, but where is this impacting the business the most across Bumble app and to do and ARPUBERS payers. And then Anu, thank you for the initial 24 guidance.

Speaker 5

Curious at a high level, any framing that you would put around expected contribution from Bumble App or Purdue or our poover's payers? Thank you.

Speaker 3

Hey, Corey, sure. I can take that. So on the macro, like you said, like I said in my prepared remarks, We are largely seeing it around our younger users, our more price sensitive users. Those are the users that obviously are going to be impacted by the students' laundry payments as well. We are not seeing it much more broadly.

Speaker 3

So for example, Bumble premium adoption rates have stayed pretty steady through the quarter, but we are seeing a little bit of impact on the younger users as it relates to Bumble Boost. So again, something that we are keeping a close eye on, but we think It is largely limited to a certain cohort that is more impacted by this. Obviously, this is a U. S. Specific issue.

Speaker 3

So we are seeing this on Bumble much more versus on Baidu. To your second question, just to elaborate a little bit on how we are thinking about 2024 guidance is, Now obviously, as you can imagine, we are still very much in the planning stages for next year. And there are still a lot of moving parts in terms of how we are thinking about 2024. I will say that there is a ton of excitement around what the product roadmap looks like, what our international plans are and the teams are very, very deep in the middle of putting all of those on paper. And so far, we are very, very excited about what this means for us for next year.

Speaker 3

We wanted to provide some high level numbers, so all of you can have some context going into next year, recognizing that we have a CEO transition and succession in place. And so We will be evolving our thinking as we get into our Q4 earnings and into 2024 specific guidance. Right now, we are thinking about total ink revenue, like I said in at least in the low teens. We do have a 1 to 2 point of FX headwind next year. So that's why on an ex FX basis, on a like for like basis, you're talking about ink level growth of about 15%.

Speaker 3

That's how we're thinking about total 2024 guidance. If you look at the components of it, We are very, very excited that we will see strong contributions from Bumble, as well as Wedu, which is on a good path to stabilization. Bumble BFF will largely be contributor from a user growth perspective. We do have some monetization plans, but a lot of it will still be in testing next year and fruits and fish are also exciting additions to the business. For Bumble app, again, more to come on that, You should assume that we are looking at revenue growth rates slightly above where the company growth rates are.

Speaker 3

So Let's say, low to mid teens is where we are looking at Bumble app guidance. We'll talk more about the components of what this means in terms of payers versus our people, etcetera. But I will just say that growing payers will continue to be a big focus for us for next year. And then Badu will also be a pretty strong contributor for revenue next year's Badu app and other line items. And then finally on EBITDA, we are very committed to margin expansions as we've been saying now for a while.

Speaker 3

We've given preliminary guidance of expanding margins by about 50 basis points to 100 basis points. We still haven't fully finalized all the areas of investment and so we want to make sure that we are adequately providing for things that Whitney just talked about in terms of investment in AI, investment in data, etcetera. But our commitment to expanding margins has change. So again, we'll provide more specifics, but at a high level, these are sort of the building blocks of how we are thinking about next year.

Speaker 5

Thank you. Very helpful.

Operator

Okay. Your next question comes from Ygal Arounian with Citi. Please go ahead.

Speaker 6

Hey, good afternoon. I wanted to see if we could tie together some of the guidance with the leadership changes here. And so I know you talked about in the 2024 preliminary outlook, building on the leadership plan, you're finalizing your investment priorities. Still a ton of focus around product, obviously. And then with Lydiana coming on board and with it moving to the Executive Chairman How you think about those investments?

Speaker 6

What are the any change in strategies? Are you kind of putting On pause, how are you going to make that transition? Just help us understand how all that will flow through? Thank you.

Speaker 3

Yes. So at a high level, I think our strategy that we've been following has been largely consistent with what we started out with when we first went public, right? As you think about the building blocks that we have for growth haven't really changed for us. And as Whitney mentioned earlier, focus on innovation, focus on customers and focus on brands is something that we've been very consistently been doing and we don't expect that that changes next year either. I think obviously with Lidiani's background in product and tech, we definitely think that that will be an area of investment for us.

Speaker 3

We want to and again, not dissimilar to what we've been saying for the last few years. That is what drives our engine. So I think You'll see us continue to talk about that. And then obviously, as she comes in and ramps up on the business, I'm sure she'll have very strong ideas of the things that she wants to do. So that's why I think some of this will be fluid for us as we get into next year.

Speaker 3

But as you think about our high level guidance, we wanted to make sure that we gave everyone at least guardrails, that you can operate with going into 2024. So that was really the attempt, at giving a very high level guidance for next year.

Speaker 5

Okay. Thank you.

Operator

Okay. Our next question comes from Shweta Khajuria with Evercore ISI. Please go ahead.

Speaker 3

Okay. Thank you for taking my questions. Let me try 2, please. One is just a quick thought on why no repurchases in the quarter? And then second is, could you provide more color on the 2 product subscription tiers, please?

Speaker 3

The one that's lower priced in terms of the timing, the pricing, and the rollout, for both plans, please. Thank you. Yes, sure. Shweta, just quickly on why we didn't buy back any shares. We were because we were in the market in the middle of a leadership search.

Speaker 3

We were unable to buy shares, just for legal consideration. So that was the reason why we didn't we weren't able to buy shares. And I'll turn it to Whitney for the product.

Speaker 2

Yes. Hi. Thanks for the question. So let's talk about the 2 different subscription tiers. We'll start at Premium Plus.

Speaker 2

We are really excited about Premium Plus. I want to underpin this by saying that it has actually been largely one of the most requested features in and of itself that we have received over a long time now, because it delivers a more curated, more high intent, more, we could say thoughtful experience, Right. You have a better chance of a match and there's a lot of other layers that, come with this Premium Plus experience. We've been really, pleased with the very early indicators and the early results we're seeing. So you can expect an update in the coming quarter.

Speaker 2

And then moving to base tier, This is really focused on the different types of engagements and the more personalized experience that particularly Gen Z enjoys. So the way call it 18 to 22 year olds are looking to express themselves on themselves is actually quite different than the older cohorts, even their peers just a few years older. And we are so good at listening being on the ground and understanding what this age group is really looking for when it comes to meeting people. And so that's what base tier is all about. It is in early testing right now and we don't have specific timing or pricing to share publicly today, but I can tell you that it will be a low price point.

Speaker 2

This is really with the intention of expanding payers and creating a more engaging experience for that next generation. Meanwhile, on the other side of that barbell, Premium Plus will be, a much premium experience than that obviously and more premium to the current premium offering. And we believe that the blend of this will be

Operator

Our next question comes from Justin Patterson with KeyBanc Capital Markets. Please go ahead.

Speaker 5

Great. Thank you very much. I wanted to touch a little bit on Baidu. You had mentioned doing a brand identity Brandon, identity refreshed its carton next year. How are you thinking about just the timeline towards that helping really restore user growth and revenue growth for Baidu into 2024.

Speaker 5

Thank you.

Speaker 2

Thanks for the question. So you know what, we're really excited about Baidu. We have a great team leading the do and they are really anchored on one key focus, build confidence. So this is a quite remarkable, finding. If you go and speak to the B2B audience, Prior to some of these efforts that we've been leading that have been leading to the results you're seeing that we reported today and what we expect to continue.

Speaker 2

These members say that they want to find someone. They're lonely. They really have high intent to meet someone, but they have super low confidence. They don't feel great about themselves when it pertains to dating and how they think they'll be viewed. And so the team has anchored 100% around that.

Speaker 2

So you can imagine that will be the nucleus of a hero campaign of a brand relaunch. These are coming throughout the rest of the year and early 2024. I think you will be pleased to see the efforts ramp here domestically, but also around the world. And everything is really working backwards from the customer pain points. So they are solving members' issues, which is leading to real tangible results.

Speaker 2

I actually think, there's an important note here for everyone tuning in. Demand for love is at all time high. Demand for relationships It's higher today than ever, right? We're a lonely society. We're super isolated.

Speaker 2

We're super disconnected. Social media does not introduce us to our love lives. That said, we see such potential with all of our products and giving Baidu this real clear intention of solving for confidence has already been proving to be working. So Stay tuned. We're really excited with the early progress and the results should speak for themselves.

Speaker 5

Thank you.

Operator

Okay. Our next question comes from John Blackledge with TD Cowen. Please go ahead.

Speaker 7

Great. Thanks. Two questions. First on Bumble app paying users, what are kind of the key geographies For Bumble app paying user growth in the Q4 and next year. And then on the recent products, complements and besties, are they more so Driving payer growth or ARPPU or both, if you can just provide some more color there, that would be great.

Speaker 7

Thank you.

Speaker 3

Yes, sure. So as we think about payer growth, our focus is on making sure that we have payer growth across every market. So Obviously, the U. S. Will continue to be a big focus area for us and we want to make sure that we continue to grow our user base there.

Speaker 3

So you'll definitely see us Focus extensively on that. Obviously, our international markets are growing really well. So you'll see, we are hoping again, this is not just the Q4 statement, right, going into 2024 as well, focusing on our core English speaking markets like the U. K, Australia, Canada outside the U. S.

Speaker 3

Are important. Western Europe, as we've been saying now for a while, has been a very important market for us, especially in countries like Germany, where we are the 2nd most downloaded dating app. Again, those are strong payer additions for us. Also markets like Switzerland, Netherlands, France, again markets in Western Europe, I think will be important for us. Asia, especially India, is big market for us.

Speaker 3

So making sure we have a sizable user base of active users there. So making sure that we increase the payer penetration there is something that the team is quite heavily focused on. Certain other markets in Asia as well are green shoots that we are looking at. And then recently, we've launched in LatAm. There are certain markets in LatAm that we are focused on.

Speaker 3

Obviously, as we always say, when we enter a new market, our focus is on active users, growing the user base. And then slowly, as they get to a sizable user base. We then start to convert them into paying users. So our playbook for how we think about international growth is largely the same. We are obviously in the middle of figuring out exactly which countries will new countries we will enter into next year.

Speaker 3

So when we come back in Feb. We'll look forward to sort of providing more details on that. And then as it relates to your second question around complements and best fees, We've said this before, obviously, depending on how a product is engineered, often these can be drivers of payers, drivers of our people, or in many cases both. For both of these products, I will say, We are our goal is to drive both of these metrics. Right now, complements is still very much an ARPPU driver.

Speaker 3

Obviously, we've gotten new payers as a result of that, but we are definitely seeing higher adoption from existing payers. So you're seeing that reflected in the ARPU. And then on Best Piece as well, Best Piece, I would say, is still early days. As we said before, it's now part of Bumble Premium. And so we've seen strong adoption from People entering Bumble Premium as an entry point from Best Buy.

Speaker 3

But we look forward to It becoming a payer driver as we continue to build out the product and we continue to refine it.

Speaker 8

Thank you.

Operator

Okay. Our next question comes from Mark Kelley with Stifel. Please go ahead.

Speaker 9

Great. Thank you very much. I just had 2 quick ones. The first one is just on the new pricing tiers with Bumble App. I know Whitney you said that they would be protective of ARPU.

Speaker 9

Is a good starting point for 2024 just to assume kind of flattish ARPU for Bumble App? That's the first one. And then the second one, completely understand that you're early in the planning phase for 2024 and there's a lot of moving pieces. But, I guess What line item should we look to for that operating leverage that you're calling out for next year? Thank you.

Speaker 3

Yes, I can take both of those. I think It's a little bit too early to be talking about the sort of puts and takes of what our people will look like next year. I think Obviously, our PIPU is a function of several things. It includes our international mix. It includes pricing changes that we are doing in different markets that includes the new products that we are launching.

Speaker 3

I'll just say, wait for us to provide more details on exactly what our people looks like next year. Just at a high level, if you think about the different pricing tiers, our goal is to make sure that we are capturing in more payers across the ecosystem of users that we have. And so if you think about the higher price tier, it's an opportunity for existing premium users to potentially upsell and pay more, in which case it becomes an RPPO driver. And then over time, our goal would be to to get non daters and non Bumble users directly into the Premium Plus ecosystem as well, which then becomes a payer driver. And then in the beginning, on the lower tier, our goal would largely be for it to be a payer conversion.

Speaker 3

We have a lot of people on our app today, especially in the on the sort of younger side of the demographic that use the app for free, but then don't necessarily want to pay for Bumble Boost and Bumble Premium. So having a lower price tier allows them to pay for the product in a way and start getting used to the payer feature. So that's one I would say Our goal would definitely be for that to be a payer driver. Again, as we increase the number of subscription products that we have in our ecosystem. Our goal is to make sure that we are constantly managing the ecosystem in a way that It continues to be healthy.

Speaker 3

And then on your question around operating leverage, I think again, if you think about the building blocks for next year, It should it won't be too dissimilar to how we thought about leverage in 2023. So you will see us Continue to invest again very strategically in product and technology. I've always said this before and our company knows that the bar for investment is high. And so we want to make sure that we continue to maintain that high bar. But obviously, innovation is what drives growth for us.

Speaker 3

So you'll see us invest in that. We want to continue to show leverage on areas of marketing spend. So Building our brand is always going to be important for us. So while we will be spending towards it, on a percentage of revenue basis, our hope is that We will see some leverage there. And then we always strive to as we get bigger and as we have more scale, we always strive to get leverage in other areas such as G and A.

Speaker 3

I think cost of revenue is likely going to be largely steady to what you're seeing right now. Again, more to come though. Hopefully, that's helpful.

Speaker 9

No, very helpful. Thanks very much.

Operator

Our next question comes from Chris Kuntarek with UBS. Please go ahead.

Speaker 8

Hi, thanks for taking my questions. Just maybe one on the 24 revenue guide for at least low teens. Can you just help us think about kind of the cadence of that throughout the year. I think you kind of guided to about 14% year over year growth at the midpoint for 4Q. Should we be thinking about This is a bit of deceleration from that sort of low end of mid teens down to low double digits or is this going to be a relatively stable level of growth throughout the full year and kind of what you're seeing right now that gives you a confidence in that cadence?

Speaker 8

Thank you.

Speaker 3

Yes, sure. So again, I think it's a little bit too early to be providing sort of very specific quarterly guidance numbers of how we think the cadence is. I think at a high level, if you look at The growth rate that we are seeing today, the way we are thinking about it is we are looking at the growth rate that we are seeing today. We are looking at the product roadmap that we have. We are looking at the things that we know we are either already in testing or have already launched and then will start to become bigger next year.

Speaker 3

And we see a range of outcomes. So again, more to come on exactly what The quarterly cadence will be, but we feel good about the overall number for the year.

Speaker 8

Got it. Thank you.

Operator

Our next question comes from Zack Morrissey with Wolfe Research. Please go ahead.

Speaker 10

Great. Thanks. I just wanted to, I guess, ask about the kind of macro impact on the consumer book business. You talked about kind of the lower kind of income users being affected with seeing that through the kind of premium being more stable. But I guess what are you seeing on the consumable side of the business?

Speaker 10

And then secondly, just curious, you've called out increased Competition from Tinder increasing their marketing spend and especially in certain markets in Europe. Can you just provide an update kind of what you're seeing in some of those kind of key markets in terms of competition on the marketing side. Thanks.

Speaker 3

Sure. So on the consumable side, as you know, Most of our paying users are also subscribers to our products. So we over index on the subscription side of the business, if you think about the composition of revenue. So consumables is a smaller portion of it. Within consumables, I think we are seeing Numbers largely hold steady, so we are not really seeing any sort of big impact in what we are looking at Across age groups, I think it's largely been steady.

Speaker 3

So nothing really to call out yet as something that stands out for us.

Speaker 2

And then, Whitney, do

Speaker 3

you want to just talk about marketing in general and competition and just what we are seeing?

Speaker 2

Yes. So I You know what, this is such a big piece of my excitement going into this step forward into the Executive Chair role. I am in my heart and in my skill set, I'm a marketer, I'm a brander. This is such a superpower of ours and the unique brand that we have built up over the years.

Speaker 3

And so we've said this once, we'll say it again.

Speaker 2

We have such a durable moat and we really have loyalty with customers with women that has never been seen before in any dating related category. You don't really see dating app hats walking around the street. And so the fact that we have a beloved community that want our merchandise. They want to integrate us into their weddings. They are proud of us.

Speaker 2

This is where we shine. And I'm going to put so much love, attention and care into this in 2024, take our brand to the next level, take our mission to the next level, create that evangelized beloved fandom around Bumble and Bumble for Friends. Another thing that's worth calling out. The connection, the emotional connection that women in particular have to Bumble for Friends is so special. Our brand symbolizes trust, respect, safety.

Speaker 2

When you think about our opportunity to consistently scale that message unique to Candidly, just unique to ourselves, this is really where I get so excited. So that paired with innovation and product, all the horizon of AI. We're right for a very exciting next chapter and I'm personally not IRF moved concerned about any competitive threat from a brand or marketing standpoint. We've got this.

Operator

Okay. Our next question comes from Nate Feather with Morgan Stanley. Please go ahead.

Speaker 11

Hey, everyone. This is Nathan Feather on for Lauren Chang. I guess thinking about the product roadmap, What are the kind of the 1 or 2 key features that you're expecting will drive revenue growth in 2024? And then given the increased buyback authorization, How should we think the cadence of share buybacks and maybe capital allocation more broadly going forward? Thanks.

Speaker 2

Thanks. So I'll talk about the product roadmap for a moment. So we're super excited about the entire ecosystem that is going to be built inside and around Premium Plus. We see this as our opportunity to build a more premium brand within the brand that exists today. This is going to extend beyond just a couple of features bundled into a subscription.

Speaker 2

This is going to be an all inclusive experience. We also feel that there is a huge opportunity to leverage this for the go online to offline opportunity. So people are consistently saying, I want to meet people in the real world, but I can't. It's too hard. You literally have to be at the right place at the right time.

Speaker 2

It's nearly impossible to meet that special someone in real life. So leveraging Premium Plus is this all inclusive gateway to meeting incredible people via Bumble, but also getting you offline. So we're incredibly excited about Premium Plus as not just a revenue driver, But a real growth driver, a loyalty driver, recapturing share from these folks that are looking for something more serious. So Premium Plus is really exciting. The other thing I would say is leaning into this theme of confidence, you will see that translate in its own way back to Bumble app well and using generative AI to really be this best friend in your pocket inside of Bumble to help you date, to build confidence, to feel good about it, so that you never delete this app because it didn't make you feel good about yourself.

Speaker 2

So I think we are really overhauling the entire interface and experience in 2024 and Bumble 2.0 is going to be a product that goes much higher in terms of these offerings, but leaning into the other end of the barbell to really capture that college age audience as well. New discovery mechanisms and really engaging people for the next decade.

Speaker 3

Yes. And just quickly to touch on capital allocation, Nate, Nothing has changed in terms of our overall philosophy of how we think about capital allocation. We've sort of always said this before. Our goal is to invest in our business. 1st and foremost, we have a ton of organic growth ahead of us and so we want to make sure We do that, and within the envelope of margins that we have set out for ourselves.

Speaker 3

We will be opportunistic to the extent there is something from an M and A perspective that makes sense. Again, the bar for that is high, as we've said before. But if there's something interesting for us, we'll definitely take a look at that. And then we've always said the buyback gives us another tool to return capital back to shareholders. And that's what you see reflected in the increase in the repurchase authorization from the $150,000,000 that we had a couple of quarters ago to now $300,000,000 We want to be opportunistic about how we buy back shares.

Speaker 3

So nothing specific to call out in terms of cadence of how we intend to do it. But this is definitely something that we are very, very focused on doing and you'll see us be opportunistic in terms of buying back shares.

Operator

We will take our final question for today from Ben Black at Deutsche Bank. Please go ahead.

Speaker 12

Great. Thank you for

Operator

sneaking me

Speaker 7

in here and good evening everyone. I just wanted

Speaker 12

to double click on AI and Whitney, obviously you've Talking about AI potentially supercharging safe human connection. Can you just give us some examples of how AI can actually support new innovative Sort of product launches at Bumble. And do you also think you could supercharge the velocity of product development as well? Thank you.

Speaker 2

Thanks for the question. So let's start with the second part of that. The short answer is yes. Technology and the AI tooling that both exists internally, but externally. Velocity is going to be able to ramp exponentially faster.

Speaker 2

Let's talk about how this can actually tangibly supercharge love and connection. So, I think the reason why AI can be so incredibly value added and business enhancing to our business in particular is because look at what people come here to do. They come to our product to meet people. They want to meet people that are compatible to them, that will make them feel good about themselves, that will have shared passion, shared values, shared desires, dreams and hopes for the future. Right now, with our very early innings of AI, If you look at the AI algorithm for Best Buy already the ability to say yes to match to chat is exponentially higher than just the basic algorithm.

Speaker 2

And that is the very baseline of what AI algorithms can do. So imagine a world where And then I'm going to talk about the other facets of this. Let's just focus on matching for right now. Imagine a world where you don't have to swipe through dozens, potentially hundreds of people to find your special someone. You don't have to swipe through endless people to find someone to go out for a fun Friday night with.

Speaker 2

You can do this seamlessly in just a matter of moments. When AI is integrated into this product, through all the different technology that currently is available and that we're working on, implementing ranging from clip technology, reading photos, voice, All the different ways to detect relevancy, you can deliver someone their perfect person in such an efficient, safe, effective way, so much more than what exists today. So while we're already driving Extremely high rates of compatibility and success stories, right?

Speaker 3

You there's too many to count. This is just going to

Speaker 2

be a multiplier of that. Now let's move to the other facets of this really quickly before we wrap. Expressing yourself is incredibly important in determining relevance with somebody else. The way AI can help you build profiles, understand your personality, extrapolate the best from you, and then really just condense that into a short form profile. We are at the very, very, very early innings of what that can do.

Speaker 2

So those are just 2 small pieces in the interest of time of where I think AI on day 1 can be extremely value added. The last piece I would say is companionship from an AI bot standpoint. We are not here to replace humans with machines. We are not here to replace humans with bots. But what we can do is give you a tailored program bought to be your coach, your therapist, your pal, your wing person, your companion, while you navigate the quest for friendship, love, business, whatever you're here looking for.

Speaker 2

So I think we're at the very, very early innings of something extremely exciting. And I hope it is reflected in the buyback, in my enthusiasm, in this brilliant leader joining us, how excited we are about the opportunity.

Speaker 12

Very interesting. Thank you very much for that.

Speaker 9

All

Operator

right. Thank you. Ladies and gentlemen, that concludes today's call. We appreciate you joining. You may now disconnect.

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Key Takeaways

  • Leadership transition: Founder and CEO Whitney Wolfe Herd will become Executive Chair on January 2, 2024, with Lidiani Jones stepping in as the next CEO after a deliberate succession process.
  • Strong Q3 performance: Total revenue rose 18% year-over-year to $276 million, adjusted EBITDA reached $75 million (27% margin), and Bumble App paying users increased 25% to 2.6 million, adding 147,000 net new payers sequentially.
  • Product and AI acceleration: Bumble is embedding generative AI and machine learning across its apps, scaling features like Compliments and Best Bees (AI match curation), and testing two new subscription tiers—Premium Plus for high-intent daters and a lower-priced Gen Z tier.
  • Global expansion: The company gained download share and payer growth in Western Europe—remaining #2 in Germany—as well as momentum in Latin America, Asia, and through new apps Fruut and BFF, particularly with Gen Z women.
  • Capital return boost: The Board has increased its stock repurchase authorization from $150 million to $300 million, with Q3 free cash flow of $69 million underscoring ongoing financial discipline and commitment to buybacks.
A.I. generated. May contain errors.
Earnings Conference Call
Bumble Q3 2023
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