Bumble Inc. Q2 FY2021 Earnings Call

Welcome to the Bumble Second Quarter 2021 Financial Results. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. I would now like to hand the conference over to your speaker today, Brinlea Johnson. Please go ahead.

Thank you for joining us to discuss Bumble's Second Quarter 2021 financial results. With me today is Whitney Wolfe Herd, Founder and CEO; Tariq Shaukat, President; and Anu Subramanian, CFO of Bumble. Before we begin, I'd like to remind everyone that certain statements may be made on this call today that 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 statements to reflect changes that occur after this call. Descriptions of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31st, 2020 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 different from our GAAP results. Reconciliation to the most comparable GAAP measures is available in today's earnings press release, which is available on our Investor Relations section of the website at ir.bumble.com. With that, I will turn it over to Whitney.

Thank you, Brinlea, and thank you all for joining us. I hope everyone tuning in today is staying healthy and well. Q2 was another excellent quarter for us. At the group level for Bumble Inc., we delivered strong results with total revenue of $186 million, up 38% year-over-year, and adjusted EBITDA of $52 million representing a 28% margin. Bumble app revenue grew 55% year-over-year to $127 million and Badoo app and other revenue grew 11% to $59 million. Our average paying users in Q2 increased 20% year-over-year to 2,900,000. Our excellent performance demonstrates that the need for love and relationships is more important than ever before. After a year-and-a-half of the pandemic, more people than ever before now recognize the benefit, safety, and access that online dating provides. When COVID accelerates and loneliness climbs, people turn to us for connections. And when markets reopen and the desire to meet new people in real life surges, Bumble Inc. helps people find new relationships quickly and safely. Despite the challenges that the world is facing with the Delta variant, we're continuing to see positive trends across our platforms, even in some of the most affected markets. For example, in Q2, we saw increased engagement and activity even with the spread of the Delta variant in India, and Bumble app monthly active users grew at over 60% year-over-year in that market. According to third-party sources, we have gained or maintained download share in most of our major markets for both the Bumble app and Badoo app in 2021, and in Q2, including download share gain in the U.S. for the Bumble app. Our results in Q2 and the traction we are seeing in Q3 show that we are able to serve our users effectively as the world faces its pandemic curves and also as markets re-open. While we continue to actively monitor the COVID situation in all of our markets around the world, we are confident in our performance for the rest of 2021 and I am pleased to say that we are increasing our full-year revenue guidance to $752 to $762 million, up from our previous high-end guide of $734 million, representing a year-on-year growth rate of 30% at the midpoint. This performance is driven by strong execution against the strategic priorities we outlined earlier this year, including our ongoing monetization efforts, rapid international expansion, re-engagement of users in our core markets, and retention and engagement improvements driven by product innovation and data science efforts. We're continuing to expand these efforts, including acceleration of the Bumble app's global expansion, investment in the next generation of our friend-finding service, Bumble BFF, and rollout of two-tier pricing for the first time on Badoo, starting in Q3. Let me give you some details on performance by app. Starting with the Bumble app, the Bumble app had a very strong quarter with revenue growing 55%, with growth coming both from paying users and ARPPU. On a global basis in Q2 registrations and monthly active users on the Bumble app grew at the fastest year-over-year rate since the beginning of the pandemic. We also saw a 26% increase in re-engaged users and achieved record levels of daily active users in Q2, fueled by registration growth, customer reactivation, and material improvement in customer engagement and retention. Our teams continue to innovate to ensure that we are serving our users in the most forward-thinking, safe, and effective way possible. During the pandemic, women searching for serious relationships was at an all-time high, so we updated our onboarding process for those looking for more serious relationships, prompting members to create robust and more in-depth profiles to increase the compatibility between two customers. We also partnered with Snap to bring augmented reality features into our video chat, and we extended our Night In trivia experience to India with high levels of engagement. The average time spent on the Bumble app increased by 10% in Q2 with time on the platform for women 24% higher than that for men, demonstrating the power of our women-first model that really leads to healthier and more balanced ecosystems for all users. Global expansion continues to be a major driver of Bumble app growth. As the UK and Ireland started to reopen in Q2, we saw very rapid growth with U.K. revenue growth of over 70% year-over-year, supported by our targeted local marketing efforts. The DACH region continued to be a major driver of growth, growing monthly active users by over 100% and now representing our fourth highest revenue market with revenue growing at over 200% year-on-year. Other parts of Western Europe, including France and the Benelux region, also continued to grow at a very rapid rate. As of our presence in Southeast Asia and India, we continue to be pleased with the progress we are seeing in our social discovery and friend-finding platform BFF. Despite still being a V1 product as of Q2 2021, 10% of our Bumble app monthly active users are using BFF. Our teams are hard at work building the next-generation BFF platform, and we expect our new product features to start rolling out over the next several months. The early results of our tests are encouraging and suggest strong user appetite for these new features that are under development. For example, on the first day of beta testing, our new interest feature on BFF saw an over 500% increase in users adding interest to their profile. We really look forward to providing more updates as we continue to advance our launch. Now let's turn to the Badoo app and other revenue which grew 11% year-on-year in Q2. Badoo app is a global-scale player operating in a large number of markets, including Eastern and Western Europe and Latin America. The pandemic is still a significant challenge to the broader population in many of these areas, in particular to the Badoo user community, which is predominantly urban middle-class and has faced economic pressures from COVID. While, according to third-party sources, Badoo has maintained or gained download share in most of its major markets in Q2, user growth, especially in our legacy web platform, has been challenged under these conditions. However, we're pleased to report on many successes this quarter that fueled our double-digit growth. The Badoo team has focused on improving monetization and user engagement and many of our user engagement metrics are at their highest levels in over two years. Day 1 and week 1 retention and one of our core measures of user success, which we call "good chat," have all increased in Q2. We've remained very focused on improving monetization and engagement and are seeing evidence of our efforts taking hold. Payer penetration is growing at healthy rates in many of our major markets, including a 40% increase in Brazil and a 34% increase in the U.S., and we're starting to see user growth on iOS. For the second half of the year, we are focused on reintroducing Badoo to users as COVID conditions improve and on launching a range of new features and experiences tailored towards the changes in user behavior that have emerged during this pandemic. We look forward to continued improvement in Badoo as markets and economies recover from the pandemic conditions and come back up to Bumble Inc. levels. One of the key elements that make us who we are is our focus on safety and accountability. This is not just a one-time investment or an initiative run out of a special silo. It is embedded in every aspect of our business. Last week, we announced an industry first, a partnership with RAINN and Bloom to be the first dating app to provide trauma support to survivors of sexual assault. I cannot tell you how important this is to me and to our entire team, and it is something we hope that the entire dating industry will follow. We have been continuing to deploy our machine learning expertise to make the experience on our apps even better. In Q2, we made a major push with a new set of data analytics and machine learning models to improve the moderation of chats on Badoo, and we are very pleased with the results. We now catch more bad actors before a user experiences an issue, improving the quality of our experiences and reducing potential abuse. This is a continuing focus of ours across all of our brands. As we think about the future of Bumble Inc., our team remains focused on executing against our strategic priorities and long-term growth plan. Our group today consists of the Bumble app, the women's-first app where women always make the first move, and the Badoo app where users can quickly and easily make real connections without pressure. Both are built on our foundation of engineering excellence and safety, accountability, and kindness. We're looking to grow organically by leveraging our shared technology platform to build safe, kind, and accountable technology for new communities. We also see opportunities to acquire businesses consistent with our mission and values that can help us expand our presence, reaching new geographies and customer demographics. Bumble Inc.'s mission of helping communities across the globe find healthy and equitable relationships through all stages of their lives supports a tremendous long-term opportunity, one we believe our brand can own. And with that, I want to say thank you so much for your time today, and I will now hand it over to our CFO, Anu.

Thanks, Whitney. And hello, everyone. In Q2, we saw continued momentum in our business with higher-than-expected revenue and adjusted EBITDA performance. Total revenue in the quarter grew to $186 million, an increase of 38% year-over-year, and adjusted EBITDA was $52 million representing a 28% margin, an increase versus 24% in Q2 of last year. As a reminder, the revenue in the second quarter of 2020 was impacted by a $4 million reduction in deferred revenue recorded in purchase accounting. Q2 revenue growth was driven by strong improvements in total paying users, which grew 20% as well as growth in total ARPPU, which grew to $20.88, an increase of 15% year-over-year and 4% sequentially from Q1. Bumble app revenue was $127 million for the quarter, representing strong growth of 55% year-over-year. Bumble app paying users increased 36% year-over-year to 1.5 million, an addition of 120,000 versus last quarter. As Whitney noted, the growth in our Bumble app community continues to be robust with strong contributions from North America, as well as from our newer international regions. In Q2, we continued our expansion in Europe with the launch of Austria, Switzerland, Netherlands, and Belgium. Throughout Western Europe, we saw triple-digit paying user growth in Q2 with the DACH region being exceptional, growing more than 200%. Bumble app ARPPU for the quarter was $28.81, which grew 13% year-over-year and was up 4% sequentially. We were especially pleased with the strength in metrics for women with year-over-year ARPPU growth rates for women outpacing that of men by more than 100%. During the quarter, we completed the launch of two-tier for Android in our remaining markets, and I'm very pleased to say that as of the end of Q2, the adoption rate of the higher tiers continues to be more than two-thirds of new users. Within the Bumble app, we expect our monetization work to continue with the introduction of new consumables and subscription offerings. For example, in June, we launched an extended Spotlight, which provides increased visibility for our power users. Badoo app and other revenue were $59 million in Q2, which was up 11% year-over-year. Similar to the Bumble app, we saw improvements in payer penetration with paying users increasing to 1.5 million, up 8% year-over-year. Paying user growth came from our core Badoo markets, such as Brazil, Russia, and the U.S., which delivered strong results. Badoo app ARPPU in Q2 increased 4% year-over-year to $12.85. Drawing on the learnings from the launch of Bumble Premium, we will be rolling out tier pricing for Badoo later in Q3. We expect the launch first in the U.S. on both iOS and Android, with the remaining markets to follow closely in Q4. In addition, as we mentioned in the prior quarter, our work on our next-generation of consumable products on Badoo is also ongoing, as we work on providing a low entry point for members to convert into paying users. Turning now to expenses, I will discuss these on an adjusted basis, excluding the impact of stock-based compensation and one-time transaction costs. Cost of revenue was $50 million, up 36% compared to Q2 of last year on account of higher aggregator fees, which grew in line with revenue. As a percentage of revenue, this was flat year-over-year at 27%. Sales and marketing expenses in the quarter were $47 million, up 20% year-over-year. As a percentage of revenue, it was 25%, down from 29% in Q2 last year, and slightly up from 24% of revenue in Q1 this year. As some markets opened up at the beginning of summer, we leaned into reopening campaigns in the U.S., France, Germany, Netherlands, and the U.K. We will continue to be nimble in investing in marketing next quarter around reopening efforts, including market expansion initiatives in Asia and on-campus, in-field marketing efforts as colleges come back in session. G&A spend was $21 million or 11% of revenue, in line with our spend in absolute dollars in Q1 of this year but higher than Q2 last year, mainly driven by increased headcount and public company costs. Second-quarter adjusted EBITDA grew to $52 million, an increase of 60% over the prior year, representing adjusted EBITDA margins of 28%. As our top-line revenue has shown rapid growth, we are continuing to demonstrate operating leverage in our business. Our stock-based compensation expense was $30 million for the quarter, which was up from $3 million in Q2 of last year, primarily due to modification of equity awards at IPO. We generated a net loss of $11 million for the quarter, and we ended Q2 with $252 million of cash. Turning to our outlook, we are confident that our momentum on the Bumble app will continue into the second half of the year. While Badoo has shown itself to be resilient through the pandemic, reduced exposure to COVID is more prominent for the Bumble app given its geographic and demographic footprint. Hence, we expect that Q3 for Badoo may see some impact from Delta, but as these markets come up on the vaccine curves, we feel confident in our ability to continue our momentum through the end of the year, and this is captured in our increased full-year outlook. With that, we're pleased to raise our full-year guidance for both revenue and EBITDA. Looking ahead to Q3, we expect total revenue in the range of $195 million to $198 million, representing a growth rate of 21% at the midpoint of the range. We expect adjusted EBITDA to be in the range of $48 million to $50 million, which represents a margin of 25% at the midpoint. For the full year, we expect revenue in the range of $752 to $762 million, a growth rate of 30% at the midpoint of the range. For adjusted EBITDA, we expect $195 to $200 million, which represents an EBITDA margin of 26% at the midpoint. To close out, we had a very strong first-half performance. We demonstrated our ability to scale our business, grow revenue while staying disciplined, and improve profitability. Our increased guidance reflects our confidence in the momentum in our business and our ability to execute on our strategic direction. And with that, we will now be happy to take your questions.

As a reminder, please stand by while we compile the Q&A roster. Our first question comes from Cory Carpenter with JP Morgan. Your line is now open.

Hey, thanks for the question. I think the first one for Whitney and Tariq, you touched on this a bit in your opening comments, but hoping you could expand on the impact you're seeing from the latest surge of COVID cases, any evidence at all slowing momentum in markets such as the U.S.? And then for Anu, could you expand a bit on some of the drivers of the upside that you saw from revenue in Q2, and some of your key assumptions in the guidance? Thanks.

Sure. Hey, Cory. This is Tariq. Thanks for the question. I guess I'll start with the first piece on the Bumble app. In particular, we're not seeing any material impact from COVID from the Delta variant spread in the U.S. I think that the U.S. markets are continuing to perform very well for us on Bumble. That is generally true on the Bumble app worldwide, even in markets that are experiencing this resurgence of Delta. As we mentioned, Badoo is seeing a little bit more impact, particularly in some of the international markets where there is more COVID impact. But in general, on Bumble, as I said, no real sign of an impact; engagement is at pre-pandemic highs on both Bumble and Badoo. And so, we're feeling very confident about this quarter.

Sure. And Cory, just to your second question, our growth in Q2 really has been a function of strong growth across the board for paying users and ARPPU for both Bumble and Badoo. As I said in my comments, we've been very pleased on the Bumble side with the momentum. We've seen growth not only in our existing markets but also in many of our new markets, which is obviously very exciting as we look at our international expansion. A lot of the work that we've been doing around two-tier pricing has really paid off as we think about our ARPPU growth. As we thought about guidance, if you take all of this, we've been super pleased with the strong first-half growth we've had so far. And with revenue up 38% in Q2 with Bumble growing at 55% and Badoo at 11%, our overall business has shown very strong, healthy engagement and momentum in many of our markets. So, we're super confident about raising our full-year guidance at 30% at the midpoint of the range, and our Q3 guidance assumes revenue will grow at 21% at the midpoint. If you break it down by app for the Bumble app, because of the growth that we've seen in Q2, and as we look at the progress so far in Q3, we're seeing very strong growth rates across all our major markets. We're expecting growth in both paying users and ARPPU, and we expect that sequentially that will continue between Q2 and Q3. We're very positive about markets that we are in today like North America and the U.K., where the vaccination rates are high, and also in markets that we are expanding into, including Western Europe and DACH, etc., for ARPPU. We finished the roll-out of two-tier, as I said, and we do expect to continue to see the benefits of that as more new users continue to come into the higher price tier. That is very positive news for us as we think about growth in ARPPU in Q3 and Q4. Interestingly, in recent months, we've actually seen that adoption of the higher-priced tier has been higher than the two-thirds we've been talking about. So, in some markets, we've actually seen adoption of upwards of 70%. Again, very, very positive signals as we think about what the rest of the year looks like. For the Badoo app, as I mentioned, Badoo has a large-scale base today, and its users are urban middle-class and it has a large geographic footprint where they have experienced higher impact from COVID. So, we do expect to see some impact on users and paying user growth, but as we move into Q4, we're actually very excited about the rollout of two-tier for Badoo which we think will be very beneficial from a monetization perspective. If you put all of this together, we feel very confident about raising our full-year guidance.

Thank you.

Our next question comes from Nick Jones with Citi. Your line is now open.

Great, thanks for the questions. I guess first on new product features increasing usage, how should we think about any additional features for the rest of the year and what the potential impact could be on usage? Do you think there are some features that can still move the needle meaningfully? And then I guess maybe could you tell a little bit about the Snap partnership to bring AR features onboard? Thanks.

Sure. Hey Nick, great question. Let me talk about Bumble and Badoo in turn. On the Bumble side, a lot of what we're focusing on is really features that are helping to engage our users as their preferences have shifted from a relationship standpoint. Whitney mentioned more focus on serious relationships; we're seeing a lot more focus on what we're calling intentional dating — people are much clearer coming into that dating market about what they're looking for from a relationship, and we are trying to give them the tools to do that and make the experience better for more serious and intentional types of relationships. Much of what we've done in Q2, as well as our plan for Q3 and Q4, is focused on activities like that in addition to new monetization features. As I referenced last quarter, some of the consumable experiments that we're doing in different parts of the world continue. We have a very active innovation program building on top of what I just talked about as the optimization part of what we're doing, and that is a very active exploration of features like augmented reality, Snap and video features. It's probably too early to go into a lot of depth about those pieces, but a lot of work and testing is going on in those areas as well. On the Badoo side, it's a similar story: we are very focused on how we help people as they start to come out of the pandemic. It's a little bit of a lag from what we're seeing on Bumble largely because of the geographic footprint, but again the same themes arise around intentional dating, more robustness in profile elements, better matching features, and algorithmic updates across both Bumble and Badoo. All of those are coming together for us in the second half of this year.

Great, thanks for the answers.

Our next question comes from Mike Ng with Goldman Sachs. Your line is open.

Hey, good afternoon. Thank you very much for taking the question. I just had one on the Bumble app: it was really strong in the quarter. I was wondering if you could help to quantify some of the contributors to the year-over-year acceleration in growth. How much was really the two-tier pricing rollout on iOS and then Android, as well as some of the innovation and the à la carte products? Thank you very much.

Sure. Thanks, Mike. When we talked about monetization for Bumble, we've always said that we've been really focused on moving more people into the subscription tier. When we started this work last year, the number of Bumble paying users that were also subscribers was in the low 90%s. That number has actually gone up; we're now closer to 93% in terms of the number of paying users that also subscribe to one of our products. That has largely been due to two-tier because two-tier actually includes consumables in the package as well, which was not the case prior to that. Obviously, we launched Bumble Premium, and that rollout is now complete. As I said in the prior question, we are starting to see adoption pickup for the higher price tier. In many markets, we had adoption upwards of 70% and we still actually have a small long tail of users that are still on the old pricing system and they will continue to migrate as they come back into the system. So, that still needs to move into the new price tier. But two-tier really has been a huge part of why you've seen the growth in ARPPU, which is obviously very important to us, especially as we think about taking the learnings from the Bumble app to Badoo. As we think about the rest of the year and going forward, we are continuing to review pricing in each market and you will see us continue to adjust and iterate to be competitive in every market that we operate in, but also to make sure that all the work that we're doing on price elasticity and subscriptions manifests itself into real improvements in ARPPU. So that's very exciting for us. We are working on additional product features in the form of consumables. I mentioned in my prepared remarks that we launched an extended Spotlight in June. It is a consumable that provides increased visibility if you're a power user, so that helps to improve our ARPPU as well. We have a few other interesting consumables that we are testing that are in the works, and you will hear us talk about them in the next few quarters.

Fantastic, that's really helpful. Thank you, Anu.

Our next question comes from Brad Erickson with RBC. Your line is open.

Thanks. I guess I'll follow up to that last comment. Just curious, what's the cadence by which you guys expect to roll out some of these new products, like the consumables you just mentioned? Is that going to be like an every-year thing alongside potential new tiers, or is it maybe a little bit less frequent than that?

Yeah. I think we have a multistep launch process. We are very active test-and-learners, and one of the advantages of our footprint geographically and demographically is we can test a lot of things and build confidence in the impact, engagement, and value before we roll it out. We have dozens, if not hundreds, of experiments going on at any given time. When we find something that really adds material value to the user, we actually roll those out continuously. That is generally for enhancements to the user experience — we always want to provide the best experience possible to our users. As it comes to monetization, we try to bundle these together a little more, but certainly on a frequency that is more than annual. So, we would expect several launches per year; of course it depends on how big the changes are and it might be a little lumpy from year to year, but generally speaking, we believe in launching frequently and driving innovation in the experience that our users have.

Thanks. That's helpful to understand the philosophy. And then I guess just a follow-up: what have you seen lately in terms of the competitive landscape for the Bumble brand? Particularly how you're feeling about diversification beyond some of the major MSAs where some competitors have shown strength. Any update there would be great. Thanks.

Yeah. We are continuing to see very rapid growth on the Bumble app. According to third-party data sources we track, in the majority of scaled markets that we operate in, including the U.S., we are holding or gaining download share. When you look across the landscape, some competitors are growing and some are declining, but we do not see any scaled player in the last six months gaining material share at the expense of Bumble. We continuously invest not just in product innovation and our technology and machine learning, but we also continue to invest in our brand, which gives us a competitive advantage and allows us to reinvest in that mode that has been a big part of our success. We're confident that this will carry us into the decades to come. Turning to Badoo for a second: the markets it operates in are slightly more challenged from a COVID standpoint, but the same point holds — we're gaining or holding share while many of those markets are dealing with the pandemic. We always focus and pay attention to our competition, but we are obsessively focused on our users. We continue to listen to the customer and build for the customer; if you continue to do that and provide the best experience for what they want, we are confident we will continue to be successful and competition will not be a major risk.

Just to build on that for one second in terms of MSAs and geographies: in the U.S. we have a strong presence in the larger cities and we are continuing to build our geographic expansion not just internationally but in the U.S. as well, focusing on other Tier 1 and Tier 2 cities and in particular college towns. As Anu and Whitney mentioned, with colleges returning, we see opportunities even in our established markets like the U.S. and U.K. to continue to geographically diversify in addition to the work we're doing in Western Europe and Southeast Asia.

And a final point I want to make is our brand is strong. If we continue to stay focused on machine learning, the algorithm, and continuous improvements, we're confident competition is not an issue for us.

That's great. Thanks.

Our next question comes from Shweta Khajuria with Evercore. Your line is open.

Okay, thank you. Two questions from me, please. First, can you talk about engagement trends? You called out India in particular — was there anything in particular that you would like to call out that drove engagement? You mentioned trivia and any other geographies where you saw outsized engagement and the reasons why. Second, how is BFF trending? You're planning to roll out new features over the next few months, which to us implies you are seeing some strengthening engagement there. Could you talk about what you're seeing with BFF? Thanks.

Sure. Let's start with BFF. It's important to set the stage for the exceptional TAM that exists within BFF. The friend-finding opportunity in the platonic relationship category has become even more important and in-demand throughout the pandemic. People experienced lonely times and this opportunity exists across the friend-finding category. The fact that 10% of our Bumble users are using BFF today tells us that we have immense permission to be a broader brand for friend-finding and ultimately a broader women's lifestyle brand. Our focus in 2021 is fundamentally on product development, getting the product to a much stronger position beyond the minimum viable product. When you look at the experimental data coming out of these early innovations, our new onboarding flow has led to an over 200% increase in daily active users that are using both BFF and Date in those test markets versus life currently. This validates the opportunity ahead for both engagement and monetization. Historically, ARPU for users who use both BFF and Dating together is about 30% higher than Dating-only customers, which signals a huge growth opportunity for us in the future. The product will provide users with the ability to connect in groups, to lean into the community opportunity, to find groups of friends, and to join communities, not just a one-to-one experience. We are very excited to update you more on future calls.

Turning to engagement trends more broadly, a couple of things to call out: first, optimization efforts. We have teams focused on improving onboarding and retention, and it's hard to overstate how important those efforts are in boosting engagement. Second, we've been investing heavily in algorithmic changes around our people-recommendation algorithm, improving our ability to identify who you're most likely to want to match with. We've seen significant improvements in matching. We've also invested in capabilities to get more data such as asking people to express their interests — about 40% of people on the Bumble app are telling us not just profile information but what they're interested in, and we use that as part of the matchmaking algorithm. Regarding Night In, India had one of the best responses of all markets for Night In; it was widely adopted by people who use video chat and are engaged post-match in India, despite the catastrophic situation there in Q2. So, Night In provided an outlet for people to connect virtually.

Okay. Thanks.

Our next question comes from John Blackledge with Cowen. Your line is open.

Thanks. Two questions. First, any updated thoughts on potential App Store relief and timing? And secondly, very solid EBITDA with strong incremental margins; the guide implies margins in the back half are down a couple hundred basis points from the first half. So I'm curious about investments in the second half driving the slight margin compression. Thank you.

Sure. John, there's a ton of regulatory scrutiny around app store fees and we are watching all of it very closely. Our current EBITDA guidance for the second half assumes minimal impact from Google Play, and we're having conversations with them about what this means for 2022. They've been great partners to us and discussions are ongoing. As we have more information, we'll share it. On the EBITDA front, you're right that we are planning incremental investment in the second half, particularly in marketing. We've said we want to be nimble and opportunistic about continuing to invest in our business as opportunities present themselves. That is built into our guidance for Q3 and Q4. Marketing is one of the biggest areas where you'll see us invest. We'll adjust marketing plans based on how markets reopen. We've done well transitioning grassroots, on-the-ground marketing to digital marketing over the last 12 to 18 months, and we'll make sure we deploy capital efficiently. That built-in investment is what drives the step down from Q2 that you see in our guidance.

Thank you.

Our next question comes from Andrew Marck with Raymond James. Your line is open.

Hi, thanks for taking my question. How should we think about the size or magnitude of the opportunity in two-tier pricing and the effect it could have for the Badoo app versus the Bumble app, given the differences in customer demographics and payer penetration rates between the two apps? Thanks.

Sure. The benefit of launching two-tier after having spent the last few quarters launching Bumble Premium is we have a ton of learnings from markets where we've launched. You're right there are differences in how Badoo customers behave and their propensity to pay versus Bumble. We'll be doing something slightly different with the launch for Badoo: we expect to launch the lower tier at roughly the same price as where Badoo customers are today, with the higher tier including additional consumables. So it's a slightly different strategy than how we launched Bumble Premium. We've been doing many tests in many markets which makes us confident we will see ARPPU growth as we start the launch. We look forward to giving you more updates once the launch happens, starting at the end of Q3. You'll also see us roll out two-tier at a faster rate for Badoo because we have the benefit of learnings from Bumble, and you'll see us accelerate rollout through the end of the year.

Great. Thank you.

Our next question comes from Lauren Schenk with Morgan Stanley. Your line is open.

Hey, thanks for taking my question. Just on the implied fourth quarter guide, it looks like you're expecting some acceleration in the fourth quarter on tougher comps last year. Just wondering what the driver is behind that — maybe it's Badoo being impacted by Delta in the third quarter and then not in the fourth quarter? Any color would be helpful. And secondly, any impact that you're seeing from IDFA on your marketing efficiency broadly? Thanks so much.

Sure. I'll take the first part and Tariq can add. In terms of the uptick in Q4, two things: for the Bumble app, we're excited about continuing the rollout in international markets, so you'll see more growth coming from markets we've already launched into such as Northern Europe and DACH. We're also excited about launching newer markets, some in Asia later in the year. From an ARPPU perspective for Bumble, we expect healthy growth coming from two-tier benefits as well as the launch of new products in the pipeline. For Badoo, two-tier is a big part of how we think about growth increasing in Q4; tests we've run show that ARPPU will see nice growth. We're excited about that as we think about Q4 growth. Tariq?

Lauren, on the IDFA question: we're seeing essentially flat to slightly down CPIs since IDFA changes. I'm proud of our marketing team and how we've been able to navigate this. One thing to remember is we only rely on performance marketing for about 20% of our new customer acquisitions and we have a very strong organic channel, which helped. CPIs are pretty stable for us as we've navigated through this; the team is working on how to scale further, and so far it's been generally good news.

Okay. Thank you so much.

Our next question comes from Brent Thill with Jefferies. Your line is open.

Whitney, I know you've mentioned don't get excited about BFF in the short term, but as you look longer-term, do you think there are different revenue models you could attach? For example, advertising was barely up year-on-year — could that be a much bigger segment, or are there other ways you're creatively thinking through monetization of BFF over time?

Thanks, Brent. It's a topic I'm very excited about. While I can't give specifics today, the short answer is absolutely — there are major monetization opportunities ahead, and we would categorize them broadly in three ways. One: subscription — different from current dating subscriptions because looking for a friend is a very different use case, so the subscription model will differ, but we are bullish on subscription opportunities. Two: advertising — this is a large opportunity but we wouldn't necessarily go down a programmatic model; it could be very high-quality partnerships given the nature of the product. And three: the creator economy — this is an exciting opportunity as our audience is prime for creator-led experiences. All three categories are attractive as we look forward. Historically, interest from partnerships and brands has been strong and over-indexed towards friend-finding, so people are excited to tap into that audience. On BFF more generally, think back to when dating took off in mainstream products: friend-finding is an exploding category similar to dating several years ago, and we're excited about the horizon here.

Maybe just a quick follow-up on geos. Was there a territory that surprised you in terms of bounce back that stood out?

Sure. The DACH region has done really well from a user-growth perspective and has shown impressive revenue and payer-penetration growth. India also surprised us with high levels of engagement; despite being hard hit by COVID in Q2, the features we released helped keep the market strong.

Thank you.

Our next question comes from Dan Salmon with BMO Capital Markets. Your line is open.

Hi, good afternoon. Could you expand a bit more on your M&A priorities right now — certain features, certain markets — and your latest views on whether it makes sense to grow your portfolio? Whitney, also maybe one or two more lines on what might make the advertising opportunity a megawatt opportunity and what differentiation you see down the road? Thanks.

Sure. On M&A, we're in a fortunate position where M&A is not required for us to maintain and accelerate growth at the group level — Bumble app itself has tremendous untapped potential and Badoo as a scale player is significant. That said, we are open to M&A if the opportunity is right. We have a disciplined approach with operational and financial rigor. When evaluating M&A, we ask: how can we reach more audiences in deeper ways? How can we help our existing members find more tailored ways to connect? And how can we leverage our scale in technology, marketing, safety, and monetization to benefit other brands with huge growth opportunities? All opportunities are assessed through make-or-buy criteria. We'll build where it makes sense and supplement with acquisitions when financially and operationally sensible. We have a foundation of engineering excellence that gives us strategic flexibility, and our shared model allows us to share resources across the group. On advertising and BFF: BFF has a remarkable opportunity to lean into people's shared joys and struggles. If we do our job well, we help people find each other in the real world and there's huge advertising and partnership opportunity tied to that offline connection. Also, because people use BFF to find others with similar needs and interests, there's a high-quality advertising and partnership opportunity — likely not programmatic but high-value partnerships and brand engagements. Brand interest in partnering has been strong already.

Thank you.

Our next question comes from Steve Koenig with SMBC Nikko. Your line is open.

Thank you very much. Congrats on a good quarter and guide raise. A housekeeping item for Anu: I want to confirm the numbers on the deferred revenue/purchase accounting headwind. You mentioned the headwind was $4 million in Q2 and I recall $9 million in Q1. Am I correct that the headwind diminished by $5 million and when does that write-down become de minimis? Then for Whitney: you updated onboarding to encourage more detailed profiles for those seeking serious relationships. What's driving that effort — is it expected to improve engagement or is it a response to a shift in the market? How should we think about it?

Sure. If you look at our 2020 numbers, the total impact of purchase accounting adjustments was $15 million, so Q1 and Q2 had the most impact. There's a little left to go in the second half of the year, but it is becoming smaller.

Okay, very good. Thanks for that. Whitney, what about the onboarding changes? What's driving them and is this a shift in the center of gravity of the product?

Great question. The onboarding updates were about collecting more information from customers who are expressly looking for more serious relationships so they can create more robust profiles and find more compatible matches. In Q2 we saw a 10% increase in members filling out the "About Me" section, a 13% increase in connecting Instagram, a 12% increase in members filling out lifestyle badges (e.g., views on children, drinking, religion), and a 17% increase in members answering profile questions. Building a more robust profile DNA helps people find more relevant matches.

To add, we're trying to make sure the experience is right for whatever relationship type a user is interested in. People are more explicit about what they want post-pandemic, and we want to give them tools so they can state that and meet people who are compatible. One of the biggest changes during the pandemic is that people seem to know what they want and want to get there more quickly.

Got it. Great, thanks very much for the color.

Our next question comes from Lauren Champine with Luke Capital. Your line is open.

Thanks. Quick housekeeping: the stock-based comp came in a little higher than expected. What are your thoughts for the back half of the year on that line?

Sure. Our stock-based comp was higher this quarter primarily due to modification of equity awards as well as new grants post-IPO. We expect this number to moderate over future quarters, but there is an uptick post-IPO which led to higher expense. Into next year, you should think of it roughly at the run rate of the back half of this year.

Great. Thank you.

That concludes our question-and-answer session. Thank you for joining the Bumble Second Quarter 2021 Earnings Call. You may now disconnect.