Bumble Q2 2023 Earnings Call Transcript

Quartr
Provided by Quartr
August 8, 2023

There are 11 speakers on the call.

Operator

Hello and

Speaker 1

thank you for joining Bumble's Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. I I will now hand the conference over to Cheryl Valenzuela, Vice President of Investor Relations. Please go ahead.

Operator

Thank you for joining us to discuss Fumble's 2nd quarter financial results. With me today are Whitney Wolfe Herd, Founder and CEO Tarek Shaka, President and Anoop Subramaniam, CFO of Bumble. Before we begin, I'd like to remind everyone that certain statements made on this call today are 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.

Operator

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 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. And with that, I'll turn it over to Whitney. Thank you, Sheryl, and good afternoon, everyone. Thanks for joining our call today.

Operator

Our second quarter results demonstrate the strength of our apps and our solid execution on our goals for the year. We delivered a strong quarter with better than expected revenue growth, Accelerating paying users and robust profitability. Total Bumble Inc. Revenue of $260,000,000 was up 18% year over year, driven by Bumble app revenue growth of 23%. Our total paying users increased 20% to reach 3,600,000 And adjusted EBITDA was $67,000,000 representing a 26% margin.

Operator

With loneliness on the rise globally to the point that has been declared an Epidemic in the U. S, there is considerable room for each of our apps to grow and have significant impact on people's lives. We have a well constructed portfolio of apps to bring people closer together. Within dating, we have an extensive global footprint where we have at least one top 3 apps by download share in over 50 countries. Our focus is on continuing to drive market share gains, opening additional new markets and driving further depth of engagement and payer penetration.

Operator

Let me provide an update on each of our apps. I'll start with Bumble App. Q2 revenue grew 23 percent to $208,000,000 driven by continued momentum in paying users. From Q1 to Q2, we added 139,000 payers, a significant acceleration from the 98,000 net adds we reported last quarter. The growth in payers was fueled by strength in top of funnel metrics, including new and reengaged users, reflecting the overall health of Bumble's ecosystem and our continued payer optimization efforts.

Operator

As we've discussed previously, Fumble App's business model is built around generating durable growth. We focus on building preference, particularly with women, for our brand and our product, which in turn drives strong word-of-mouth, downloads and high engagement. This delivers consistent growth quarter after quarter and is sustainable as we scale. The results are clear. Our core markets continue to grow, fueled both by new registrations and reengaged users.

Operator

Our newer markets in Western and Southern Europe and key markets in Latin America also continue to On the product side, I'm proud of how well our team is advancing our vision and roadmap. Let me begin by updating you on some of the initiatives we've discussed 1st, compliments, our message before Match feature continues to ramp in both usage and revenue contribution. Its unique value proposition has landed well with early adopters. This feature is driving improved brand perception and engagement As complement recipients are 70% more likely to get a match, we're continuing to invest in the experience to drive greater awareness and adoption. We are also excited with the traction of Fast Speed, our new feature that leverages the power of our new AI algorithm to curate match recommendations for users.

Operator

We were pleased with our initial test and decided in mid Q2 to accelerate our rollout. Best Bees was added to our Bumble Premium subscription tier in late May and is now available worldwide. Early indicators have been positive And after bundling Best Buy's into Bumble Premium, we have seen uplift in both new subscribers and renewals. We also see best bees improving chat initiation rates. Best bees also illustrates the practical and powerful ways we are employing AI to As I said last quarter, while AI is already core to several initiatives, including the recommendation as well as our safety efforts, we are now exploring opportunities to bring generative AI into our users' experience.

Operator

A few examples, providing interactive advice on improving and curating profile, enhancing the relevancy and compatibility of matches and preventing toxic behavior. Overall, Gen AI will be a catalyst in reducing friction and pain points along the dating journey. At the start of the year, I talked about the foundational engineering work we've done that enables us to be more flexible with our subscription and consumable offerings. Bumble has successfully grown revenue primarily through 2 subscription tiers, Bumble Boost and Bumble Premium, with the majority of our paying users on the higher priced tier. 2 years since the introduction of Premium, as we look at the needs of our users on our service, it is clear that there are opportunities to Further expand our subscription offerings on both ends of the pricing spectrum.

Operator

We are continuing to test a base subscription tier to create a differentiated experience and more affordable offering that will appeal to Gen Z members. Based on our high quality user base, We have conviction that there is also demand for a higher priced product above Bumble premium. We believe this higher tier will and provide value to existing Bumble members with more serious dating intent. We expect this will also resonate with singles who are not Currently using dating apps because they desire more curated experiences. We will start testing this product later this year.

Operator

Bumble's product momentum is supported by marketing that showcases our brand and mission. According to Morning Consult, Bubble continues to retain the top Net Promoter Score among dating apps for women in the U. S. And this favorable brand awareness translates into valuable customer acquisition opportunities and makes us a highly thought out marketing partner. I'd like to highlight a couple of recent examples of our marketing team's great work.

Operator

In late June, we launched Summer of Kindness, our global integrated marketing campaign built around our feature launch of Compliments. The campaign centers around the power of kindness, which is engineered into the Bumble app. To highlight this, we rolled out a film called Kindness is Sexy as well as outdoor ads, partnerships and influencer campaigns, spreading compliments around key cities. Last month, we also kicked off a category exclusive partnership with Barbie, the worldwide number one movie of the summer Via a 360 global co marketing campaign where we encouraged users to have the best day ever by receiving motivation from the film's many Barbie and Ken characters to send compliments on Bumble. We were the only dating app to garner a partnership with Barbie, which is another great example of our strong and differentiated brand.

Operator

The feedback from both of these launches has been overwhelmingly positive, And I'm proud of how well they represent Bumble's mission and values. Now turning to Baidu. Baidu app and other revenue totaled 50 2,000,000 in Q2, up 2% year over year. This is the first quarter of year on year growth for Badu Since the first half of twenty twenty one, I'm excited that the Baidu's turnaround plan is having the desired impact and the business is on a good path to stabilization. On the product side, we've been modernizing the app, minimizing friction in the user experience and providing our members with new ways to interact that are more in tune with the post pandemic environment.

Operator

These efforts have begun to bear fruit with strong new user growth in most of our markets alongside improvement in engagement trends. Monetization continues to improve as well with sequential paying user net adds of 34,000 and Several of Baidu's top markets returning to positive revenue and payer growth this quarter. We plan to build on this momentum in the second with a brand refresh and continued innovation on its core discovery mechanics to help people instantly connect with the most relevant matches for them. FRUITS also continues to scale. It launched in the UK, a meaningful first step in expanding beyond its base of French speaking markets.

Operator

Early results have been promising, particularly with Gen Z adoption and engagement, and we plan to introduce fruits in more markets in the coming months. A key part of our broader growth strategy is to strengthen the ecosystem of connections, whether it's new relationships, established couples or friendships. Part of my original vision for Bumble has always been building relationships beyond Dating, we believe there is tremendous opportunity in this expansion and we recently took 2 important steps towards building out that vision. First, we acquired Official, an app that strengthens existing relationships by providing date ideas, mood check ins and other features for Couples. Official is available in 45 countries and has been downloaded more than 1,000,000 times since it was launched.

Operator

Official helps relationships that start on Bumble, B2, Fruit or anywhere else maximize their full potential. This opportunity can increase the lifetime value of our customers and open up broader lifestyle business adjacencies. 2nd, I'm thrilled to announce that our new and standalone BFF app, Bumble for Friends, is now live in several countries, including the U. S. The app is built to create a new way for people to discover meaningful, kind and fun friendships in their local area.

Operator

It maintains what people have loved about BFF and adds a new easier way to plan group activities. We are launching at an opportune with more people open to making friends online than ever before. In a recent Bumble for Friends survey, 2 thirds of Gen Z respondents Shared that making new friends online lessened their loneliness and we are uniquely positioned to make a difference in this space. We have seen strong early results with the new app. Gen Z engagement is a particular standout.

Operator

By the end of Q2, Our youngest BFF users were spending 34% more time per week in the app compared with the equivalent BFF mode cohort. Over the next several quarters, we'll continue to invest into the experience based on member feedback. We'll also begin testing several tasks for monetization. Although we don't expect material revenue contribution this year as we prioritize the user experience. In summary, It has been a productive and rewarding first half of the year.

Operator

As a company, we have been very customer centric, nimble and decisive. We have achieved substantial progress on the product front. We are executing well and we are continuing to deliver on our strategic priorities. Our strong first half positions us well to achieve our goals across our growing family of apps for the balance of the year and into 2024. Before I conclude, I would like to take a moment to thank Tarek for all of his contributions to the company.

Operator

He has been a great leader and we wish him the best Thank you, Tarek. And of course, deep gratitude and thanks as always to Team Bumble For their unwavering commitment and hard work in support of our mission and to our customers, partners and investors for their continued trust and support. And with that, I will turn

Speaker 2

it over to Anu for a discussion of our financial results and outlook. Thank you. Thank you, Whitney, and good afternoon, everyone. Our second quarter results demonstrate the unique appeal of our app and the strong execution of our team. Total revenue growth was robust, driven by product initiatives and international expansion at Bumble App and continued progress towards stabilization of B2B.

Speaker 2

On the expense side, we continue to operate with discipline around spend, driving strong free cash flow while investing in the long term strength of our app. I'll walk you through our Q2 results before turning to our outlook for Q3 and full year 2023. Unless stated otherwise, all comparisons on a year over year basis. Total Bumble Inc. Revenue in Q2 was $260,000,000 up 18% year over year and above our outlook.

Speaker 2

Total paying users reached 3,600,000, up 20%, with both Bumble and Baidu payers showing sequential and year over year growth. Total ARPU was $23.23 down 1%. Revenue from Bumble App was $208,000,000 up 23%. Bumble app revenue growth was primarily driven by a 28% increase in paying users to 2,500,000. On a sequential basis, we added 139,000 paying users in Q2.

Speaker 2

Paying user growth was driven by strength in active users and solid improvements in payer penetration. Bumble apps RPPU was $28.21 down 3% year over year and up 1% sequentially. The year over year decline was primarily driven by geographic mix shift. Now moving on to Badu App and Other. Badu App and Other revenue was $52,000,000 up 2% year over year.

Speaker 2

Badu App and other paying users, excluding fruit, grew 7% to 1,200,000. On a sequential basis, Contain users grew 34,000 in Q2. Badu App and other ARPU, excluding Flutes, declined 5% to $12.83 primarily due to pricing optimizations and geographic mix shift. Turning now to expenses. We continue to operate with discipline and efficiency.

Speaker 2

While we are focused on investing in our apps To bring our brands to market around the world, we are also managing incremental spending in headcount carefully, and we remain committed to expanding margins for this fiscal year and beyond. Total GAAP costs and expenses were $239,000,000 for the quarter. On a non GAAP basis, excluding stock based compensation and other non cash or one time items, our total non GAAP costs and expenses $193,000,000 up 17%. Cost of revenue was $76,000,000 and grew 25%. As a percentage of revenue, cost of revenue was 29% versus 28% in the year ago period.

Speaker 2

We have now largely lapped our compliance with the Google Play Store mandate, which began in April 2022. Sales and marketing expenses grew 12% to $64,000,000 This represents 25% of revenue versus 26% in the year ago period. We remain diligent in our allocation of marketing spend and continue to see opportunities for leverage, in particular from our brand marketing piece. G and A expenses were $29,000,000 or 11 percent of revenue compared to $29,000,000 or 13 percent of revenue last year. Product development expenses were $24,000,000 or 9% of revenue versus $17,000,000 or 8% in the year ago period.

Speaker 2

Investments in products and technology is a critical driver of our growth, but we maintain a high bar for net headcount additions. Q2 GAAP net earnings were $9,000,000 compared to net loss of $5,000,000 in the year ago period. Q2 adjusted EBITDA was $67,000,000 up 23% and above the high end of our outlook range and represented a 26% adjusted EBITDA margin. Now turning to the balance sheet. Our cash position remains strong as we drove free cash flow of $40,000,000 in Q2.

Speaker 2

We ended the quarter with a cash and cash equivalent balance of $381,000,000 Our total debt position was $623,000,000 of which the $6,000,000 is due over the next 12 months. Our strong cash flow has enabled us to return excess capital to shareholders. Last quarter, we announced that our Board authorized a $150,000,000 share repurchase program. And in Q2, we repurchased 1,300,000 shares for a total of 21,000,000 Now moving on to our financial outlook for Q3 and full year 2023. We are pleased with the results we achieved in the first half of the year and remain confident in our ability to deliver within the previous full year outlook ranges for revenue and adjusted EBITDA.

Speaker 2

For Q3, we expect the following: total revenue between $274,000,000 $280,000,000 representing a growth rate of 19% at the midpoint of the range. We expect Bumble app revenue to be between 2 $21,000,000 $225,000,000 representing a growth rate between 22% 25%. Our Bumble app revenue outlook includes expectations for sequential net adds of approximately 140,000 150,000 in Q3. We are pleased with the turnaround we have seen with respect to Baidu in the past quarter. We expect the due sequential net adds to be slightly positive in Q3, similar to Q2 levels.

Speaker 2

We estimate adjusted EBITDA will be between $71,000,000 $73,000,000 representing 26% at the midpoint of the range. With the first half behind us, we are now narrowing our outlook for full year 2023. We estimate total Bumble Inc. Revenue of between 1.055000000000 dollars 1.072000000000 dollars representing a growth rate of 17% to 19%. We expect Bumble app revenues to be between $852,000,000 $863,000,000 representing a growth rate between 23% 24 Our Bumble app revenue outlook includes expectations for full year net adds of approximately 510,000 to 525,000.

Speaker 2

For adjusted EBITDA, we maintain our expectation of at least 100 basis points The authentic focus on KIND Connections, which is a hallmark of our offerings, differentiates us in the marketplace and is demonstrated in our financial results. Our team is operating with discipline and purpose to deliver value for our users, while capturing the tremendous opportunity that we envision for our brands. Thank you for your continued support. And with that, operator, we can open it up for Q and A.

Speaker 1

Our first question will come from the line of Alexandra Steiger with Goldman Sachs. Please go ahead.

Speaker 2

Great. Thank you for taking my questions. So maybe one for Whitney and one for Anu. Given your recent acquisition of Official and the launch of Bumble for Friends, Could you dive a little deeper into your long term vision of Bumble evolving into an ecosystem of love and what that could mean in terms of like future payer growth, Conversion opportunities and retention dynamics. And then for Anew, I know it's too early to talk about 2024, but how should we think about kind of like

Operator

Yes. Hi, I'll start. Thank you so much for the question. So as we've said from day 1, Bumble has always been about kind connections at large. We obviously put a Huge focus on romantic relationships and dating.

Operator

But when you look at a person's life of relationships, dating is just one Part of that. And we really want to be there with someone on their entire relationship journey. And so if you really look at this relationship spectrum, We want to be with you not just when you meet your partner, but then as you go off of the dating app and you then have a new relationship, We want to stay with you through that whole journey. And when you look at these relationships from a romantic lens, we're just talking about official right now, They're cyclical. Most of these relationships in your 20s and your 30s and even beyond they don't last forever always.

Operator

And so we're with you When you find love and then as you build that relationship together and then it really does turn into a cycle to come back into the dating ecosystem whether that be Fumble or Badu or Great. Thank you. So I'm not entirely sure where we dropped, but just to reiterate and I'll keep this brief. Our lives are made up of multiple relationships and Bumble has done a phenomenal job of really Integrating kinder connections and a safer ecosystem into people's love lives, but what we have seen is extraordinary demand For what Bumble offers as a brand, as an ecosystem, as a product in the friendship category And we have been hard at work to really launch a standalone product. And how we see this really building LTV and And really retaining customers over the long term is you might find something romantic and then you move to official and then you're not In the market for love, but you are in the market for friendship and community because you've moved to new city with that new relationship that you've just started.

Operator

And so we are really here to help people find all components of their relationships. And we really believe that over the long term, we can be The company for love and that does not mean just romantic love. That means keeping all of your relationships healthy and equitable. We do believe that there is a lot of opportunity to extend the LTV as I said of the customer journey and to really keep people Engaged with our brand and our family of products over the long term versus just having them for a short period of time as they seek a romantic partner. So this is really the long term horizon and we're really excited about what we're seeing in Bumble for Friends so far.

Speaker 2

Yes. And Alex to your Question about what does this mean for us in terms of 2024, you're right. I think it's a little bit early to be talking about what growth rates look like. What I will say though is We are very excited about the fact that we have a very well diversified portfolio. Obviously, within dating, we have Bumble, Badoo, which is doing really well now.

Speaker 2

Bumble is continuing to have momentum and Flutes is now also starting to launch in many countries. BFF is going to be exciting for us next year and now we have official in the mix as well. So we're excited about what this means for us in the coming years. Obviously, we'll provide more information in the coming quarters about what that means in terms of actual growth rates, etcetera.

Speaker 3

Great. Thank you.

Speaker 1

Your next question comes from the line of Ygal Arounian with Citigroup. Please go ahead.

Speaker 4

Hey, good afternoon everyone. I want to maybe focus on the comments, Winnie, around expanding the subscription offering to Higher tier and lower tier. Maybe, can you expand on that a little bit? I think on the lower tier, It might be similar to what you've talked about with Gen Z in the college audience. And then maybe a little bit more on the higher tier, What your expectations are there and what people are looking for from that category?

Speaker 2

Yes. Thank you so much for

Operator

the question. So we really look at monetization as a barbell, right? And if you look at the current offering, we really are primarily these 2 subscription offerings of Boost and Premium. But when you look at the very wide variety of customers and user bases that we have, we really want to ensure that we are Providing offerings that really cater to their unique needs and these customers are not all Just looking for 1 tier or one offering. And so let's start with the lower priced tier and then we'll move to the higher priced tier.

Operator

The lower priced tier It's really about building an experience that's extremely native for particularly Gen Z, a way for them to engage More ephemerally, in a way that they can kind of decorate themselves, if you will. They can express themselves in new ways, But at a lower price point, because if you think about Gen Z, not everyone has disposable income at that time. And then If you move to the higher tier, we are hearing consistent feedback from, I would say, A wide range of customer segments in fact that are looking for more serious dating. They're looking for something That they've been very willing to pay a far higher price for. They feel that the relative value of $40 or $50 a month for their special someone feels exceptionally low.

Operator

I mean, if you think about it, our high tier Currently our higher tier Bumble Premium is really the cost of a couple's drinks at any local bar. And so When you really think about the offering that we can build, at a more premium level, not just from a price point, but what we can deliver in a Curated in an exceptional way for this audience. We see that there's a lot of runway to expand there. So All to say, this is currently in motion and we hope to have updates by the end of the year.

Speaker 4

Okay, thanks. And maybe just a follow-up. I'll go to the ecosystem Idea keeping people in the ecosystem. You guys talked a little bit about leverage in brand marketing and Your key competitors out there spending a little bit more on marketing. Within this new strategy, can you talk a little bit about how you expect to kind of build the marketing message around products outside of the core traditional dating use case and what that might look like?

Speaker 4

Thanks.

Operator

Yes, of course. Thanks. So we actually believe that there's strong benefit Choose a dating category even when we go out and start to market Bumble for Friends. I'll just give you a very quick example. We hear time and time again The people that think they're not interested in dating, but are interested in finding friends, they're joining Bumble for Friends with no intention to date.

Operator

They then end up on Bumble for Friends. They changed their mind very shortly after and now they're already in the Bumble ecosystem. So it is a natural thing for them to choose Bumble dating As just a tale to them being in the friendship ecosystem. As we think about marketing more generally And we'll kind of start at the Bumble app level. We have such a differentiated brand.

Operator

It's extremely unique and it's distinguished. It's Particularly a favorite among women and Gen Z. And we really take pride in very strategic marketing efforts. A lot of our marketing is friend to friend. It's organic.

Operator

And when we do a marketing campaign, it's all integrated around products. So I'll use a quick example. This summer we've rolled out Summer of Kindness. It's not a disjointed marketing campaign with no relevance to the product. It was actually to promote The feature that we built complements.

Operator

And so what we're saying time and time again that even though our peers might be spending in higher levels, It is really not, A, changing our course. It's not throwing us off course or making us change the way we think about things. And B, it's Really not having the negative impact that someone might expect. And so we're we take a lot of pride in the way that we continue to market.

Speaker 4

Great. Thanks so much.

Speaker 1

Your next question comes from the line of Shweta Khajuria with Evercore ISI. Please go ahead.

Speaker 3

Okay. Thank you for taking my questions. The first one is on complements and best Even the potential impact,

Speaker 2

so just could you please frame the magnitude of the impact that's

Speaker 3

to the extent you can that's baked into guidance and then how we should be thinking about it next year. And then in terms of the margin expansion, under your comments, I just want to double click on that. Your confidence in reiterating this year's guide, but also in You're targeting ongoing margin expansion. It sounds like that's how you're managing your business for years ahead. Could you please talk about that as well, how you think about it?

Speaker 3

And that's it. Thank you.

Speaker 2

Yes, great. Thanks, Shweta, for the question. So in terms of complements and Best Buy's, I think I'll Sort of go back to what we said at the beginning of the year, right? We the way we think about what's included in our revenue guide is obviously we look at the data Coming out of testing for all of these products and then depending on how they land, depending on how they are doing as we globally roll them out, We make reasonable assumptions about what these would look like. Complement is pacing to what we had hoped it would do at the beginning of the year.

Speaker 2

So we haven't really changed anything in terms of our assumptions around what that means for our revenue guide for the full year. Best Piece is an interesting one. If you remember, when we first launched Best Piece, we had said we hadn't fully figured out whether we wanted to have it Be it standalone consumable product or has it be a subscription product, one of the things that we noticed After we rolled it out, it was actually leading to really good conversion rates. Our engagement rates were going up. So we made the decision to actually move Best Buy's As a feature in our premium tier and we've seen increase in people's adoption of the premium tier as a result of that.

Speaker 2

So that's definitely been a driver of payers for us this quarter as well. So as we continue To optimize this over the course of this year and next year, I think you'll see us continue to ramp up contribution for both of these products and for some of the other ones Whitney talked about. In terms of margins, you're right. I think we've consistently been saying this. Our goal is to continue to Expand margins, both in the short term as well as in the medium term.

Speaker 2

Obviously, our second quarter results Show that we are able to get the revenue growth that we want to, while still being very, very efficient with our spend. We came in Higher than what we had expected from an EBITDA perspective, because we just we were able to find leverage in areas of marketing spend And we just didn't feel like we needed to spend into the user growth that we were seeing. So that's great news for us. I think you'll see us Continue to be diligent in how we think about spend for the rest of the year. We would always want the optionality to spend if we felt like that really positioned us Well, for growth into Q1, but again, if we didn't feel like the ROI was there, we will Be very efficient and diligent about dropping it to the bottom line.

Speaker 2

So again, I think it's the same theme that you hear us talk about. Nothing has changed in terms of how we think about it.

Speaker 1

Your next question comes from the line of Cory Carpenter with JPMorgan. Please go ahead.

Speaker 5

Thank you. It looks like you've increased prices on certain Bumble app offerings in recent months. Could you just talk about the rationale and the type of response you're seeing from users? And then, Anu, could you expand on the trends you're seeing that led you raise your Bumble app net adds guide by 40,000 at the midpoint? Thank you.

Speaker 2

Yeah, sure, Corey. I can take a stab at both of those. So in terms of pricing, right, I think what's important to understand is we have a Very sophisticated pricing architecture that we operate around. And the goals that our pricing team have are not just to increase prices in every market, But it's really to optimize for the value that we are offering our users. And this is something that isn't this isn't the first time we are doing this.

Speaker 2

This is something that we've been doing for a long time and it's a continuous exercise we undertake in every market that we are in as we expand. And And we also do this as we bring new products and features to market. We are constantly optimizing and making sure that our pricing looks right. So effectively that means that in some markets we increase prices and we may equally lower prices in some markets if we feel like It's revenue accretive and it's going to lead to improvement in sales penetration. So you'll see that in some international markets, especially As we see a lot of those markets come to scale, we actually drop prices because that really allows us to get more payers into the ecosystem and that's ultimately The better outcome for us as a company.

Speaker 2

And when we think about pricing, we are we do extensive testing around what does price elasticity look like in different geographic markets around the world. And as we've said before, even in a country, different cities behave very differently. So we make sure that all of that Is sort of taken into account. And we know that there are cohorts of people that are comfortable paying higher price points For a service that helps them connect with the people that they want, right? And so, you heard Whitney talk about The higher price here, all of the thinking is really coming around again, are we offering the right value for our users?

Speaker 2

Going to your question about net We've been very pleased with our payer performance all through the year. Our top of the funnel has been very strong. We've been optimizing really well and that's led to higher payer penetration. So that's One of the reasons why we have confidence in our net adds numbers, I made the point about how our international markets are doing well. And so we are definitely seeing strong payer growth come out of that.

Speaker 2

And the last thing I would point to is, and I alluded to this briefly in my prior remarks, As some of these newer features are landing, we are really starting to get a better sense for whether these are our people drivers or conversion drivers. And That's again, we have seen strength in some of these towards payers and that's why we feel very, very comfortable about raising our net adds guides to the numbers

Speaker 1

Our next question will come from the line of Andrew Marook with Raymond James. Please go ahead.

Speaker 6

Thanks for taking my questions. On the do, we're seeing some encouraging signs there. I know in the past these markets have been more subject to impacts from COVID And economic disruption, what do you think we need to see in terms of the combination of overall market conditions and product To get back on a sustainable growth trajectory.

Speaker 7

Hey, Andrew, it's Tarek. I'll start with that and Whit may I mean as well. I think with Baidu, you're right, there's been a lot of macro effects that have hit Baidu over the years, Both geopolitical and macro effects. I think one of the things that we have learned is that the Part of Vadu that is resonating really well in this post pandemic environment is the instant experience, the fact that you have to wait less to Connect with someone the fact that there's more immediacy to that experience and that we think is what is driving The top of funnel results that we're seeing. So this is not just a story here of we're getting better at pricing or anything like that here.

Speaker 7

I think one of the key Indicators that we look at internally is, are we actually seeing stronger top of funnel? Are we seeing stronger user engagement? And then of course are we able to monetize it. And so I think that we feel very good about how the product has evolved to really Focus on that immediacy element, the brand refresh that Whitney mentioned that we're talking about will Kind of without this won't be a huge marketing campaign per se, but it will start to just emphasize those points more and more. And we think that that We'll continue to show pretty broad based top of funnel impact for us, which we're very good at converting.

Speaker 6

Great. Thank you. And then a quick follow-up, if I could. From some of the work that you've done and your surveys of users, etcetera, Do you have a view on which of the lower price or the higher price tier could be bigger from a revenue perspective?

Speaker 2

Yeah. I think it's too early to sort of quantify the impact of some of these things. I think what I would just say is We have a pretty large user base of people that are using our product and a small portion of them pay for our product, right? So this is really a mechanism for us To provide features for the spectrum of users that are already on our product and then Create value for them, right? So that's really how I would think about it.

Speaker 2

And then there are a lot of people that may not be using dating apps today, but they really want to date. So this is also a mechanism for us to get more people into the dating ecosystem as a whole. So we're very excited about what this means for us. Obviously, We still have a little bit of work to do and we'll provide more updates by the end of the year. Yes.

Operator

I would just add one thing that our brand is so uniquely positioned For this higher and lower tier offering, we have so many people that come to us and say, we want to use Bumble, but we want something more premium, more curated. We would be on this. We would pay more and we're not just talking a handful. So we really feel that there's a huge opportunity to really Cater to the folks that are looking for something much more premium than what we can offer today.

Speaker 1

Your next question comes from the line of Ben Blatt with Deutsche Bank. Please go ahead.

Speaker 8

Hi, this is Jeff on for Ben. Thanks for taking my question. Can you talk a little bit about how the international launches are scaling? Are any of your competitors' marketing efforts Such a change having any discernible impact on almost growth internationally. Also, can you give us just A little more sense of the product roadmap over the next 6 to 12 months.

Speaker 8

I know you talked about higher price tiers and more later this year, but any more color on what we should be focusing on I hope the next 6 to 12 months will be helpful. Thank you.

Operator

Yes, sure. So growth in our international markets Really for Bumble continues to be a strong source of strength for us. So we're seeing not only This in download data, but also in MAU and payer growth. We continue to see really positive downloads in markets like Germany where we've maintained our number 2 spot. So in Q2, we also successfully expanded our marketing efforts and our Launches in some newer markets like Italy and Portugal, which really continued our European expansion following our Spain launch last year And our recent launches in places like Chile, Argentina, Colombia throughout Latin America, these are also really continuing to gain traction.

Operator

And so some of these markets such as France and Germany, they have become more competitive due to these elevated marketing spends from some industry Players, but we're very pleased with our overall performance and candidly the loyalty we're seeing from women and Gen Z in particular.

Speaker 8

Product roadmap.

Operator

Product roadmap, yes. So turning to the product roadmap. Here's how I would think about the product roadmap. I'd really categorize it in 3 buckets. The first bucket is making what's already working well work even better.

Operator

So a really strict focus and dedication to optimization. And then on the flip side of that within the same first bucket is what might be causing some stress or some pain points for our customers, right? We're very obsessed with the customer, really optimizing to make those better. So the first bucket is really taking what we've got and improving. The second one is innovation.

Operator

Innovation is going to be heavily driven not just by AI from a Machine learning standpoint, but from generative AI as well. So we're really excited thematically about what we have in the pipeline from an innovative standpoint. I think what you've seen over the last call it 10 years and in my case longer than that, I've been in this industry now since 2012. We haven't seen anything really transformational as it pertains to the cell phone era of dating. And so we're really excited about how we can really take this product that works extraordinarily well, but take it to the next level and make Even more native and more compelling for today is modern data.

Operator

So innovation is going to be deeply driven by a lot of focus With generative AI, we went into a bit of that on the call. And then the 3rd bucket is building out that monetization And platform. So we've talked a lot about this already on the call, but really looking at the audience at large And being very granular, delivering an experience that really pertains to their wants, their needs and their willingness to pay. So making sure we're not leaving money on the table for these payers that might not be paying currently, but it's also a huge growth driver Because there

Speaker 8

are

Operator

1,000,000,000 we don't have a specific number, but there are so many singles around the world that Are not online yet. So we do see that this is an opportunity to do that. So, yes, the first is optimization, innovation and monetization. That's how you should think about the product strategy moving forward.

Speaker 1

Your next question comes from the line of John Blackledge with TD Cowen. Please go ahead.

Speaker 9

Hi, there. It's Logan on for John. Thanks for taking the question. First question on AI and some of these Gen AI features. Do Do you plan to monetize some of these tools going forward here?

Speaker 9

Will they be more focused on just the broader user experience? And then secondly, just on capital allocation. Could you discuss the buyback levels in 2Q? And then how we should think about those looking forward to

Speaker 4

the back half of the year? Thanks.

Operator

Yes. Thanks for the questions. I'll take the first one. So I just want to kind of set the stage on AI for a second and say Even though this is a big trend that we're hearing about everywhere, Bumble has been leveraging AI into our products for years across Not just our recommendation engine, but our safety and our content moderation efforts and so much more. But as these new tools protect Particularly this generative AI front have come forward.

Operator

We're really excited about how they can actually be integrated into the business, Not just from a product standpoint, but really across everything top to bottom in the company. If you do just look at the user journey, We look at an opportunity that can be both freemium, but also part of subscription bundles, right? So As we go higher tier, AI can be a big part of those offerings and candidly on the lower price offerings as well. Just a few random applications that I can pull top of mind right now for you to start thinking about. How do we further leverage AI generated compatibility, Right in the encounter profiles.

Operator

How do we really look at AI generated support on writing good bios and choosing the best photos and Really getting good feedback on this Connections journey, 1st moves, right? Huge opportunity in 1st moves and really driving engagement All through the funnel. So that's the way I would think about it at this time.

Speaker 2

Yes. And just quickly on capital allocation. I think We've sort of consistently said this before, we have a capital allocation strategy that takes into account, what we are doing from an organic growth perspective, What is our plan around our future sort of M and A strategy? And then we are in the fortunate position of being able to return Capital back to our shareholders and that's what you saw us do in Q2. These are decisions that we make on a daily basis As we operate our business, so nothing really to call out yet.

Speaker 2

Obviously, we'll keep you posted every quarter in terms of what that means.

Speaker 1

Your next question comes from the line of Mark Kelley with Stifel. Please go ahead.

Speaker 10

Great. Thank you very much. I was hoping you could touch on back to school a little bit. If I remember correctly, I think some of the product and marketing decisions From last year, we're kind of moved from Q3 to Q4 based on some of the feedback from your campus ambassadors. Is that something we can expect again this year more of like Q4 event, if you will.

Speaker 10

And then second, not to keep talking about generative AI, but curious if We can expect that to be to impact margins or just kind of listening to your last answer, maybe it's margin neutral. Any color there would be great. Thank you.

Speaker 7

Hey, I'll start with back to school and then I'm sure Anu will talk about the margin impact of Gen So we are paying a lot of attention to the kind of seasonality patterns that you see post COVID, one of the things in 2021, a lot of people even though they were back in school, they weren't really in school. They weren't able to socialize. They weren't able To do the things that people normally do when they first show up on a college campus, we are when we saw that change last year and that was some of the feedback that we got, we are Acting the same here that when you first show up on campus, your priority is meeting your new roommate and figuring out who do

Speaker 4

you want to date who happen Live in the

Speaker 7

same dorm as you and things like that. And so from a marketing and a product launch standpoint anything specifically targeting The that college community we would not look to do in the 1st week or 2 or 3 of a new School year, it's not to say it will be the late months, but we're just trying to be very thoughtful about the timing. And I think given most Back to school timing this year that would be late September, October similar to what happened last year. So we're expecting that. It's really a reflection we think of the sort of revised back to normal seasonality trends that we're seeing.

Speaker 2

Yes. And just quickly on your question around impact of Gen AI on margins. I think obviously we're very excited about what this means from Consumer and user experience perspective. So that's definitely an area that we are exploring quite Strongly, but equally on the operations side and I'm talking more internal operations, Gen AI has Tremendous use cases in terms of being able to improve efficiencies, productivity, etcetera, etcetera. So those are all areas that we are definitely exploring.

Speaker 2

I think it's They are early days in terms of what areas you're talking about. In the area of software development, obviously, that's one that has the most Amount of thoughts that people have already put into it. So our teams are taking a close look at how they can take some of those use cases and apply it. But there are lots of other areas, whether it's marketing, whether it's the creative side, things like that where Gen AI can be a huge sort of improvement In productivity and efficiency, which obviously hopefully will also have an impact on bottom line. Again, I think it's too early To sort of call out exactly what that means in terms of margins, but it's definitely an area that we are exploring.

Speaker 1

Your final question will come from the line of Lauren Schenck with Morgan Stanley. Please go ahead.

Speaker 8

Hey, this is Nathan Pfeffer on for Lauren. Just two quick ones for me. First for Bumble app, how should we think about the balance of payer RPP growth as we exit the year and I think it's early how that trends you think in fiscal 2024. And then more broadly, for some of those that haven't tried online dating before, What do you think are the key unlocks you're working towards that could bring more of those people into the funnel to Bumble? Thank you.

Operator

Yes, sure. So I'll start with the second question. Thank you. I think it's a handful of things. Number 1 is really being able to deliver something that They feel has the same intention as them.

Operator

So there's a lot of people that have not tried online dating because they have An idea about it that it might be too casual or it might be something that won't actually deliver them a real relationship. So I think Really the way we're approaching this is going through really methodically with focus groups of folks Who do not use dating apps but are very single and understanding what are the biggest pain points, what are the things keeping them off of the app. And then this is exactly how we're backing into our new product offerings. This is exactly how we are determining not only the product that we're going to be Releasing into the world, but what is the marketing strategy and how are we going to actually capture this TAM? The second thing is really trust safety Discretion, we rank very high on this.

Operator

I think in the category, we have made this our front and center focus from day 1. That is what I built The original kind of founding and mission of this business on is a safer, more trusted experience. But really being able to Improve upon that from a product standpoint in these offerings. So these are just a couple examples. But I will say It's quite fascinating when you do look at the single market.

Operator

When you extrapolate who's actually on the dating app, It's really quite low. And so the great news here is there's a lot of TAM out there. There's a lot of folks to bring on. The last comment here before I turn to Anoop Is this hybrid of IRL and online? So what we have seen is, there is some type of a mental block for some folks that they don't want to say Or they don't want to kind of admit to that they have met someone online.

Operator

And so we have been so focused on a lot of this IRL effort through our marketing where You kind of start offline at one of our events and then you come online. And so really taking a hybrid approach has been very important to us. So What I would leave you with is we are very focused on this. We solve problems and stay tuned.

Speaker 2

Yeah. And Nathan just quickly to talk about the sort of payout and ARPU Cadence, obviously, we've given the guidance for Q3 net adds between $140,000,000 $150,000,000 You can extrapolate what that means in terms of Q4. We see a seasonal dip in Q4 usually. So you'll see that Similar to what we've seen in the prior quarters. And then from an ARPPU perspective, if you remember when we started the year, We said that we expect ARPPU to be flat to slightly negative.

Speaker 2

I think our revenue Outlook hasn't changed since the beginning of the year. And so we are still pretty much tracking to that. So probably negative 1% to 2% in terms of our people is likely where We will end up for the year. That's how we're thinking about it. And this concludes today's conference call and we thank you for your participation.

Speaker 2

You may now disconnect.

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Key Takeaways

  • Bumble Inc. delivered a robust Q2 with $260 million in revenue (up 18% Y/Y), 3.6 million paying users (up 20%) and adjusted EBITDA of $67 million (26% margin).
  • The core Bumble app saw 23% revenue growth to $208 million, adding 139,000 net paying users in Q2, driven by top-of-funnel momentum and features like Compliments and the AI-powered Fast Match.
  • Product innovation is accelerating with generative AI initiatives for profile advice, match compatibility and safety, while testing new lower- and higher-priced subscription tiers to broaden pay-per-use offerings.
  • Bumble expanded beyond dating by acquiring Official (an app for couples) and launching Bumble for Friends globally, with early traction especially among Gen Z users.
  • Badoo stabilized in Q2 with 2% revenue growth—the first Y/Y increase since early 2021—thanks to modernized UX, improved monetization and the roll-out of the Fruits app into new markets.
A.I. generated. May contain errors.
Earnings Conference Call
Bumble Q2 2023
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