Bumble Inc. Q2 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to the Bumble Second Quarter 2022 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Cherryl Valenzuela, Vice President of Investor Relations. Please, go ahead.

Good afternoon and thank you for joining us to discuss Bumble's second quarter financial results. With me today are 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 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 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 earnings press release and filings with the SEC, including our Annual Report on Form 10-K for the year ended December 31, 2021, and our subsequent periodic filings. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. And with that, I'll turn it over to Whitney.

Thanks, Cherryl. Good afternoon and thank you all for taking the time to join our call today. We delivered strong second quarter results, reflecting the power of our product, the relevance of our mission and the enduring human need for love and connection. We built on our momentum from last quarter into Q2, delivering total group revenue of $220 million, driven by strong growth in Bumble app revenue. Total paying users across Bumble and Badoo apps reached over 3 million, with Bumble app adding over 149,000 paying users sequentially, a greater increase than in each of the past two quarters. We also reported adjusted EBITDA of $55 million and nearly doubled free cash flow from last year, a strong bottom line result reflecting both revenue growth and continued financial discipline. Bumble apps continue to power our overall growth, with revenue up 33% year-over-year to $170 million, primarily driven by a 31% increase in paying users. Before we dive deeper, I wanted to provide some more context around the resilience we have seen so far within Bumble App. I founded Bumble to make relationships better, safer, and more equal for women. That remains our North Star and is as important now as at any time in our history, because of the unprecedented challenges women are facing. We are grateful to be in the consumer business that helps people with one of their most fundamental needs, building kind and meaningful connections. That need exists whether you are in a pandemic or in a high-inflation and recessionary environment. We believe Bumble App's unique brand and trust with our users, especially women, combined with our leadership and product innovation is what's driving our success in the face of overlapping macro challenges. Our app provides tremendous value when you compare the cost of a monthly subscription with the cost of a typical first date, especially once you factor in the convenience, selection, discovery, fun and safety features that we offer. Turning back to our Q2 performance. We delivered strong results in Bumble App's traditional markets, as well as its international growth market. According to third-party data sources, in the second quarter we gained download share in almost all of our major markets including the US, Canada and the UK. Our authentic women-first positioning and our products continue to resonate in both our core markets and internationally. In the US and Canada, we are seeing existing users engage, retain and reengage at a high rate. Importantly, we are also seeing early signs that new users are coming into the fold, now that COVID has become more endemic. Our marketing programs including Bumble IRL, our expanded college programs and our It Started on Bumble success story platform are resonating with users and helping us increase brand awareness and user engagement. Outside of the US and Canada, we are very pleased with our continued download share gains as well. As a reminder, our international market expansion like our US growth is built on the back of our brand and is powered by organic user demand. We amplified this demand through our decade-long experience in product localization, our best-in-class field marketing programs, and through influencer and performance marketing. This approach ensures that we build sustainable growth and market depth, not just toeholds in each market. Let's talk about this by region. First, in Western Europe, our market expansion efforts continued to deliver strong results. We are seeing robust user growth across the region and even faster revenue growth. In Germany, Bumble was the number two most downloaded dating app in Q2. The momentum continued into July and we ended the month with Bumble as the number one most downloaded dating app in Germany according to multiple third-party data sources. We are incredibly proud of this result and believe it continues to demonstrate the power of our model. We expect to focus over the next several quarters on deepening our presence across our launch markets and expanding into other parts of Western Europe. Next, looking at Latin America. Mexico continues to perform well and our recent launches in Brazil and Chile have established a strong initial market presence for us. We are continuing to build depth in these markets to drive both user and revenue growth, and we'll be extending our efforts to Colombia and Argentina in the second half of this year. Finally, turning to Asia. We are particularly excited by the traction we are seeing. A lot of activity this year has been focusing on improving the localization of our products in key markets including for Japanese, Mandarin and Cantonese speakers, while amplifying the organic demand in our launched markets. India, for example, is a market that continues to deliver for us. And our recent localization improvements and brand initiatives are delivering rapid user growth, with revenue more than doubling year-over-year. Similarly, our efforts last year in Southeast Asia, including Singapore, Indonesia and the Philippines continue to perform well. Looking forward, we are particularly excited by the early results of our localization efforts in North Asia, and expect the region to be a focus of our 2023 effort once the situation on the ground allows. We are also very pleased with our team's execution against our product priorities for this year. We continue to take a thoughtful and user-focused approach to product development, all centered on providing an experience that is designed with the needs of our women customers top of mind. We test our products extensively to make sure they lead to the right outcomes for our users. We then expand to the market to learn from our users and really understand how to land the product at scale. We then roll out to other markets at a fast, but responsible pace. In Q2, we brought a broad portfolio of discovery-oriented products to market. We've been testing compliments, our message before match offering in Australia and Germany. And based on the positive results we're seeing, we expanded the test earlier this month to select markets in the US. We've been encouraged with early results, which suggest that those who send compliments have better higher-quality matches in conversations. In some markets, we have also been testing a broader suite of product enhancements, such as video and audio that provide our members with richer and more dynamic profiles. We are encouraged by the engagement in these new product features and anticipate rolling these out to other markets in the future. To better serve our underrepresented communities on Bumble, we also launched substantial product enhancements for LGBTQIA+ people and we began investing in features that will deliver a significantly improved experience for underrepresented ethnic and cultural backgrounds. These product initiatives are important for our mission and to our user base, especially Gen Z, and we'll continue to expand our addressable market. Finally, we are experimenting with new engagement models to better serve our women users and help drive matches. To that end, we recently launched a new weekly astrology-oriented event within Bumble app. With over 75% of active Bumble members in the US adopting a Zodiac badge on their profile, this is something that our user base has asked for throughout the year. Astrology Tuesdays have led to increases in daily active users on those days and are an example of how we're working to expand the frequency of use on Bumble by designing through a women's lens, which enriches the experience for all. We paired these engagement-driving features with our highly efficient and innovative monetization program. Q2 was focused on a number of paywall pricing optimizations to drive payer conversion. And as we look to the second half of this year, we have an exciting set of new monetization features being planned. We are just starting our monetization test for compliments and we continue to be excited about tests around vertical goods. Later this year, we will start launching our segment-specific offering, starting with college students and women users. Lastly, I'd like to spend a moment on Bumble BFF. As you know, we are building out our next-generation offering which centers on helping people find platonic connections through small communities, which we are calling Hive. As we have shared before our approach is built on the insight that people want to find friends, acquaintances and connections through shared struggles and common joys, moving to a new city, navigating parenthood, finding a partner for hiking or really anything else in between. We have recently expanded our alpha testing to the whole of the Greater Toronto area and we are excited about the results we have seen. With no external promotions, BFF members have created thousands of Hives. Within these new ways to connect, we're seeing a deepening of engagement. We've seen the weekly average number of sessions for these members increase by two-thirds and their weekly time spent in the app is up 16%. We are listening closely to feedback from our early adopters to continue to make it easier and more joyful to discover relevant Hives to join, get to know other members in your Hives and coordinate events to spend time in person. Now turning to our other dating apps, Badoo and other revenue, including Fruitz, totaled $51 million in Q2, down 14% year-over-year. It has been a challenging first half for Badoo. We, of course, exited Russia and Belarus earlier this year. As Badoo serves a more economically sensitive user base, it has also felt the effects of COVID and now the macro environment much more than the Bumble app. Despite these monetization headwinds, Badoo continues to be the second most downloaded dating app in the world with a very broad geographic footprint and a high proportion of long-tenured and highly engaged members. We appointed a new General Manager for Badoo in Q2 and we are actively working on defining the go-forward product strategy and operating model for the business. In the immediate future, we are focused on simplifying our user experience to make the product easier to understand with the primary goal of driving higher adoption for our paid features. For example, we've been optimizing our consumable offerings such as shop for credits and extra shows, which enable users to message before a match and increase their overall activity. While it is early days in recent months, we have seen improving revenue trends in many markets and a return to revenue growth on a constant foreign exchange basis. In some of our large markets, such as Poland and the Netherlands, given the Badoo's brand and scale and its organic traction in many long-tail markets such as Southeast Asia where we have historically spent very little on product or marketing. We are going to take a more active approach to these by testing both localization and marketing efforts in countries within Southeast Asia. Finally, Q2 marked our first full quarter with Fruitz. Fruitz is aligned with Bumble Inc.'s mission by focusing on encouraging transparency and honesty in dating. It particularly resonates with Gen Z users in Western Europe and Canada. We are pleased with the progress on integration. Fruitz is already leveraging the expertise of Bumble Inc. in areas such as safety and moderation and strengthening its monetization platform. It continues to be fueled almost entirely by organic demand and has established itself in a close competition for the most downloaded dating app in France. In closing, our business has been resilient and I am proud of the execution and results our team has delivered. It really is an extraordinary time. We are grateful for the opportunity to earn the support and trust of our users, partners, teams and investors by focusing on our mission and customers through operational excellence and financial discipline. Now I will turn it over to Anu to talk about the financials.

Thank you, Whitney and good afternoon, everyone. We delivered another strong set of results in Q2 with total revenue approaching the top end of our guidance and adjusted EBITDA exceeding our guidance. I'll begin with a discussion of our second quarter trends and results before turning to our outlook for Q3 and the full year. Unless stated otherwise, the comparisons I will make refer to the second quarter of 2022 versus the second quarter of 2021. Total Bumble Inc. revenue in Q2 was $220 million, up 18% driven by strength in Bumble App. Foreign exchange was a $9 million headwind to our top line this quarter with the continued strength of the US dollar relative to the euro and British pound. We saw an additional $5 million of negative impact from our decision to discontinue operations in Russia and Belarus, primarily impacting the Badoo App. In aggregate, foreign exchange and the Ukraine conflict impacted our Q2 year-over-year growth rate negatively by eight percentage points. At a group level both paying users and our Average Revenue Per Paying User (ARPPU) contributed to our revenue growth with paying users up 3% to just over 3 million and ARPPU increasing 13% to $23.65 primarily driven by a mix shift towards Bumble App. As Whitney mentioned, we have seen strong gains in download share of Bumble App in Q2 and we are very pleased that this is translating to healthy revenue growth as well. Q2 revenue grew 33% to $170 million, above the high end of our guidance range. Foreign exchange headwinds were approximately $5 million, which impacted our year-over-year growth rate negatively by four percentage points. Paying users for Bumble App totaled 1.9 million, up 31% year-over-year. On a sequential basis, we added 149,000 paying users marking the third consecutive quarter we've increased net adds. A number of factors contributed to the strong growth in paying users, including active user growth and product enhancements that drove payer conversion. Bumble App's ARPPU was $29.38, up 2%. ARPPU increased 1% sequentially primarily due to pricing initiatives, partially offset by geographic mix shift as a result of our international expansion efforts and the negative impact from foreign exchange. Now moving on to Badoo App and Other. Badoo App and Other revenue in Q2 was $51 million down 14% year-over-year. We saw significant headwinds related to both foreign exchange and the Ukraine conflict, which amounted to approximately $10 million, which together impacted growth rates negatively by 16 percentage points. Excluding the impact of this, Badoo App and Other revenue would have seen modestly positive year-over-year growth. Badoo App and Other paying users declined 25% to 1.1 million. Our total paying users decreased 136,000 sequentially in Q2 compared to the decrease of 106,000 in Q1. This included 128,000 impact from Russia, Ukraine and Belarus, which was in line with the expectations we laid out in our prior outlook. Excluding these countries, Badoo and other paying users declined by 8,000 users compared to Q1 this year. Badoo App and Other ARPPU was $13.60, up 6% year-over-year and flat versus the prior quarter. The year-over-year increase in ARPPU was due to pricing optimization work and the impact of two-tier, partially offset by foreign exchange headwinds. As a reminder, we currently include Fruitz revenue within Badoo App and Other revenue but exclude Fruitz paying users from Badoo App and Other paying users while we complete the merger integration. Turning now to expenses. Total GAAP operating costs and expenses were $223 million for the quarter, up 14% year-over-year. On a non-GAAP basis, excluding stock-based compensation and other non-cash or one-time items, I'd note the following. Our total non-GAAP operating expenses were $166 million, up 23%. Cost of revenue was $62 million and grew 23% year-over-year. The increase was primarily driven by higher app store fees as revenues have grown. As a percentage of revenue, cost of revenue was 28% compared to 27% in the year-ago period reflecting the adoption of Google Play billing in many of our markets starting in Q2. Sales and marketing expenses grew 22% year-over-year to $57 million. This represents 26% of revenue, up from 25% in the year-ago period. General and administrative expenses were $31 million or 14% of revenue compared to $21 million or 11% of revenue last year. Product development expenses were $15 million or 7% of revenue and Q2 GAAP net loss was $6 million, compared to a net loss of $11 million in the year-ago period. Q2 adjusted EBITDA was $55 million, up 6% year-over-year and represented a 25% margin. We generated $22 million of free cash flow this quarter compared to $12 million in the year-ago period. We have a strong cash position and ended Q2 with total cash of $335 million. We continue to maintain financial discipline with regards to potential uses of cash. Now moving on to our financial outlook, for the full year and Q3. For full year 2022, we are revising our total revenue outlook to be between $920 million to $930 million, which represents a growth rate of 21% year-over-year at the midpoint of the range. This includes headwinds related to foreign exchange and the conflict in Ukraine of approximately $36 million and $20 million respectively. The current foreign exchange environment remains highly volatile and if the current rates continue through the rest of the year, we estimate we will see an additional $8 million of foreign exchange headwind, not anticipated during our prior earnings call. Excluding the impact of foreign exchange and the Ukraine conflict our year-over-year revenue growth would be approximately 28% at the midpoint of the range. For Bumble App as Whitney noted, we made excellent progress on our product roadmap in Q2 and continue to be very excited about the plans in place for the rest of the year. Our revenue outlook reflects our latest view and timing of initiatives on our product and marketing roadmap, as well as current seasonality trends. We expect Bumble App revenue growth of 32% to 34% year-over-year. This includes $18 million of year-over-year foreign exchange headwinds, $7 million higher than at the time of our original guidance and $3 million higher than our prior earnings call. Excluding foreign exchange, we expect the growth rate would be 35% to 37% year-over-year. We are maintaining our adjusted EBITDA margin outlook of between 24.5% to 25% of total revenue. This includes our updated views on foreign exchange impact and the previously communicated approximately $16 million of negative impact to our margin as a result of enforcement of Google Play billing. We continue to compete for talent in the global market, but are maintaining our financial discipline as we strive to meet our hiring goals. We have not yet seen materially adverse effects on our spending due to growing inflation concerns in the broader market. This is an area we continue to keep a close eye on. For Q3, we expect total revenue between $236 million and $240 million, representing a growth rate of 19% year-over-year at the midpoint of the range. Our outlook assumes $12 million of year-over-year foreign exchange headwind. Our outlook also assumes $6 million of year-over-year headwinds related to the conflict in Ukraine primarily in Badoo. Excluding the impact of foreign exchange and the Ukraine conflict, our guidance for total revenue growth would have been 27% to 29% year-over-year. We expect Bumble App revenue to be between $184 million and $187 million, representing a growth rate of 29% to 31% year-over-year supported by continued growth in net paying user additions. The revenue outlook assumes a negative impact from foreign exchange of $6 million. Excluding foreign exchange headwinds, our guidance for Bumble revenue growth would be 33% to 36% year-over-year. We estimate adjusted EBITDA will be between $58 million and $60 million, representing a 25% margin at the midpoint of the range. This includes our updated views on foreign exchange and the impact of expected changes to aggregator fees on our cost of revenue. Throughout this ever-changing global environment, we remain intensely focused on delivering the best service to our users while delivering sustainable profitable growth for our shareholders. We intend to realize the opportunity in front of us for quarters and years ahead by prioritizing the execution of our long-term growth strategy. We will do so with a sharp focus on operational and financial discipline we have consistently demonstrated. And with that, we can open it up for Q&A.

Our first question will come from Cory Carpenter from JPMorgan. Your line is open.

Hey, thanks for the question. Anu, I have 2 and they might both be for you. I was hoping first you could just expand on the drivers of the change in the Bumble App 2022 guidance maybe flesh out how much is foreign exchange versus other items and what those other items are? And then secondly just your expectations for Bumble App net adds and ARPU in the second half of the year? Thank you.

Sure, I can address that. Let's start with the full year guidance for the Bumble App. When we initially provided guidance in March, we projected a growth rate of about 34% to 36%. Since then, we've experienced significant pressure on the pound and the euro, resulting in approximately $7 million impact on our top line, which translates to about 1.5% reduction in the growth rate we discussed. The primary reason for this adjustment is the foreign exchange fluctuations. Additionally, as we’ve been developing our roadmap for the second half of the year, we've reconsidered the timing of certain feature launches based on testing and user feedback. For instance, we previously aimed to launch college bundles before students returned to campus, but we've learned from user feedback that it's better to introduce these bundles after they have settled in. This adjustment in our roadmap is typical of our approach, aligned with our test, iterate, and expand strategy. This shift is reflected in our updated guidance for the full year. I want to emphasize, as Whitney mentioned earlier, that we are very pleased with the growth at the top of the funnel and the download trends we've observed so far. All indicators are pointing in the right direction, and we aim to optimize the user experience for our Bumble App users. Regarding the split between Q3 and Q4 based on our roadmap, the overall expectation for net adds remains unchanged from what I communicated back in March. For the second half of the year, I still anticipate ending up in the same ballpark for overall net additions. It's possible that we might see slight fluctuations between Q3 and Q4, resulting in a somewhat lower figure for Q3 than originally planned, with numbers potentially increasing in Q4. However, when looking at the year as a whole, I don't expect any significant changes.

Very helpful. Thank you.

Thank you. We move for our next question. Our next question comes from the line of Alexandra Steiger from Goldman Sachs. Your line is open.

Thanks for taking my question. Can you maybe give us a few more details on how Bumble payer growth has been trending in the different international markets? Any positive and/or negative surprises that you can share as you're expanding your geo footprint? And then, I wanted to briefly touch on virtual goods. How do you think about the monetization potential of like virtual goods in the long-term? And how do you feel about the current state of the offering and also, if we're still on track to launch Beta this year? Thank you so much.

Thank you for the question, Alexandra. Regarding international markets, we're experiencing strong user growth, as Whitney highlighted. This is especially true for Western Europe, Latin America, and Southeast Asia, where our brand, product, and marketing efforts are well-received. In many of these markets, revenue growth is surpassing user growth. Initially, we prioritize user growth until reaching a certain scale, after which both users and revenue tend to grow together. The feedback on our monetization features has been positive in the international markets we are focusing on, with no warning signs or issues to report. Germany continues to be a standout performer, and this momentum is strong in Q2 and Q3. Latin America, India, and Southeast Asia also show positive trends. On the topic of virtual goods, our previous discussions indicated that we are satisfied with our ongoing tests, which are resonating well with Gen Z users. They are not only engaging with the products but are also finding that these offerings enhance their overall experience, which is an important goal for us. Looking ahead, while plans may change, we are likely to focus on virtual goods in our college offerings, given the high interest we see. Some of the bundles rolling out as the school year progresses will include virtual goods components. Although we are still finalizing the specifics, we aim to have these available on a broader scale within college bundles by Q4.

Great. Thank you.

Thank you, Alex.

Thank you. One moment for our next question. Our next question is come from the line of Andrew Marok from Raymond James. Your line is open.

Hi. Thanks for taking my question. You mentioned that Badoo customers are a bit more macro sensitive which has been brought up in the past. But if that's the case, are there learnings that you can take from that user contingent that could help maybe insulate Bumble App from similar macro headwinds in case they get worse in some of the Bumble App core markets?

Thank you for the question, Andrew. We have consistently mentioned that Badoo users tend to be more economically disadvantaged and sensitive, generally falling within the middle class and emerging middle class segments. As Anu noted, we're beginning to see some positive signs month-over-month, indicating that our efforts to streamline products and enhance marketing are starting to show results. The customer bases for Badoo and Bumble are quite different. Although we share a platform and learn from each other, I’m not sure there are significant insights regarding economic challenges on Badoo that we could directly apply to Bumble. For instance, during the summer, we observed that Badoo users were less likely to travel compared to last summer, which may reflect broader economic issues. Conversely, we are seeing a significant rise in the number of Bumble users in the US traveling to Europe this summer, which suggests a higher level of affluence and much lower economic sensitivity among them.

Great. Thank you.

Thank you.

One moment for our next question. Our next question comes from the line of Shweta Khajuria from Evercore ISI. Your line is open.

Thank you for taking my questions. My first question is about compliments. Could you provide an update on your progress with testing and scaling? Additionally, could you elaborate on your timeline for scaling and your thoughts on monetizing that product? That would be my first question. My second question is related to the macro headwinds we are facing.

Thanks, Shweta. I will discuss compliments first, and then Whitney and I will address the macro aspects. In the prepared remarks, we noted that we've successfully launched compliments in Australia, followed by Germany, and recently, at the beginning of this month, in select markets in the US. The response has been exactly what we anticipated, with a noticeable increase in activity related to compliments. Compliments are being sent prior to matches, and they are being opened, leading to higher levels of engagement overall, which is encouraging. A key challenge is to ensure that the insights gained from markets like Australia and Germany are effectively applied in the US. We remain cautious with product launches, but so far, the results are promising, which we hope will facilitate a broader global rollout. On the monetization front, we initiated our first test earlier this week. Currently, the model allows users to send a limited number of compliments for a fee each day, with additional compliments available for purchase. This is primarily an experience designed for senders and is positioned as a consumable offering. We are exploring various configurations, and if the test is successful, it could lead to options for consumables and subscriptions. We believe the engagement levels indicate a significant monetization potential in the future. Whitney, would you like to address some of the macro questions?

Yes, sure. Thanks for the question. So as far as the outlook on the macro environment goes I think it's important to note that we're very fortunate to be in a business, really centered around this core human need and finding human connection ultimately. So people want that connection no matter what is happening with the economy. And remember our apps are such a great value compared to many other ways of meeting. Our monthly subscription is quite literally cheaper than drinks in a nice bar in New York City on just one date. So the access you can get to our product is almost unparalleled. So for Bumble App, we are not noticing any impact on the business so far as it pertains to these macro moving trends. We tend to have a more affluent customer base on Bumble Apps. And the behaviors we have seen, to Tariq's point earlier, suggest that they are continuing as they always have. So to borrow Tariq's example earlier, we've seen US Bumble customers traveling to Europe much more this summer than they did last year. And, of course, I want to be clear that on Badoo, we do have a more economically disadvantaged customer base who has struggled throughout the pandemic. So we're seeing some of those struggles continue with that audience; their travel is slightly down as Tariq said. But as we mentioned, we are starting to see some green shoots in that business as well as our new initiatives start to take hold. So continue to of course watch this very closely as it continues to be a very evolving situation but we are positive as it stands.

Okay. Thank you, Whitney. Thanks, Tariq.

Thanks. One moment for our next question. Our next question comes from the line of Lauren Schenk from Morgan Stanley. Your line is open.

Thank you. I have a few quick questions. You mentioned that the Bumble App's net additions in the third quarter may be less than your earlier expectations. Are you still anticipating a sequential increase in net additions for the third quarter? Additionally, how certain are you about seeing an acceleration in the fourth quarter given the more challenging comparisons? Lastly, do you have any updates on your discussions with Google regarding a potential deal similar to Spotify’s? Thank you.

Yes, I expect net adds in Q3 to be higher than in Q2. Initially, we anticipated a significant increase due to the launch of our lower-priced bundles earlier in Q3. However, since those launches may now occur later in Q3, the increase might not be as substantial as we originally thought, but it will still exceed Q2 numbers. Regarding Q4, we are methodical in our product testing. Last year, we successfully launched specific products in Q4, which we plan to do again. Based on our comprehensive testing, we are confident in our Q4 pipeline, with several launches starting late in Q3 and ramping up in Q4. We've adopted a comprehensive approach to product launches this year, accompanied by strong marketing strategies. This methodology has proven effective and resonates with our users. We are optimistic about our roadmap and have exciting developments underway. Overall, the positive indicators give us confidence in meeting our targets for the second half of the year. Concerning Google, I know you’ve been following recent news. Google announced changes in the European Economic Area regarding third-party payment providers. We'll be discussing the implementation with them. This change means we'll still pay Google a 12% fee and the rest to the third-party provider, so we do not expect margin savings from this. However, it will enhance user experience. We are in active discussions with Google about the larger user choice billing program and maintain a good relationship with them, so we'll share updates as we have them.

Thank you.

Thank you. One moment for our next question. Our next question comes from the line of Brad Erickson from RBC Capital Markets. Your line is open.

Hi. Thanks. When you expanded the plans from one to two, you mentioned that two-thirds of users adopted the higher-priced plan. Could you discuss your expectations for the mix with the new lower-priced bundles? Also, how much of the growth you're anticipating in Q4 is expected to come from current free users versus attracting new users with this more appealing pricing? Thanks.

Yes. So, it's likely to be a mix of both. I think we are always very, very conscious about making sure that when we launch new pricing programs that we don't cannibalize existing payers in any way. So the way we are designing the college bundle is going to be again targeted towards students that are not paying for any of our paid programs. So these will be both new college students that enter the dating ecosystem for the first time, as well as existing students whether they're in the senior year or junior year that don't pay for anything today, because they don't see value in the Bumble Boost or Bumble Premiums here, but they will start to see value in the sort of new college bundle that we put together. So it is a mixed approach. We are always making sure that we continue to drive payer penetration up. But at the same time, we're also very focused on getting new users into the fold as part of this process as well.

Got it. And then, it sounds like you're rolling out the college plan, obviously, later in the year than you’d previously anticipated, but not really changing much of the full year revenue guidance. So is it fair to assume there really wasn't that much contemplated in the original guidance around that plan? And I guess, how should we think about that ramping over the next year, particularly, maybe any color on the geos that lie beyond the US and so forth? Thanks.

Yes. I mean, you're right. So from an overall what do we have planned for the year, I think other than the fact that we are moving some things between Q3 and Q4, really there isn't any other change in terms of how we're thinking about the full year guide. Obviously, that means that it pushes some revenue from this year into the early part of next year. But again, from what we want to do and from an overall growth perspective, there's really no big change in the story other than that. Obviously, foreign exchange continues to go down. And so we've just incorporated that in our guidance for this year. Tariq, I don't know if you want to talk about our international plan for how we are thinking about the first half of next year.

Yes, if the question is about international growth, we plan to approach it methodically by region. We have discussed the countries we are in, including Germany, France, Benelux, Mexico, Chile, and Brazil. Next year, our focus will be on deepening our presence in these markets and gradually expanding into new ones. We are committed to launching our first marketing campaign, and our work in Germany is just the beginning. There is still a significant opportunity in the countries we've launched in, so we will concentrate our efforts there. We will be adding more countries, some of which Whitney mentioned for the second half of the year. Currently, we are closely evaluating North Asia for potential entry in 2023, although we are mindful of the on-ground challenges related to COVID. One advantage of our segment-specific bundle capability, like the college bundle, is that it allows us to create more localized market bundles over time. For markets such as India, it might be more effective to develop tailored local bundles instead of relying solely on our global offerings. We will be looking into this more closely in 2023 as well.

One moment for next question. Our next question comes from the line of Deepak Mathivanan from Wolfe Research. Your line is open.

Great. Thanks for taking the questions. So, a couple of ones. First, your competitor noted that the inclination from first-time users to use dating products hasn't really returned to pre-pandemic levels yet. I'm not sure if you are seeing similar trends on top of the funnel. Any thoughts of you can provide on that would be very helpful. And then second, can you talk a little bit more about the marketing spend? It came in a little bit below us, and I believe you are hoping to ramp to spend ahead of summer. Is that due to maybe better ROIs you're seeing on advertising channels, or is that due to kind of the delay in, call it, subscription to launch? Any color you can add there would be great.

Sure, Deepak. Regarding first-time users, I’ll focus on the US market, which is quite mature for us. We're observing early signs that our user base is starting to come back more actively, resembling pre-pandemic levels for the first time since the pandemic began. We are pleased with the marketing programs we have implemented in North America. The combination of Bumble IRL and our hybrid online and offline approach has contributed to this, alongside our success stories that drive word of mouth and enhance organic demand. We're noticing that new users seem more engaged than they have historically. Reengaged and existing users are also performing well, so we are not simply exchanging one group for another. This reflects a broader trend as the pandemic evolves, as well as our strategic actions on marketing and product development to adapt to a post-pandemic environment where people are eager to meet in person. It's still early days, but it was encouraging to observe this quarter. Regarding our marketing spend, we are disciplined and focused on ROI. We're achieving solid returns and capitalizing on advantageous opportunities. You’ll notice that we focus more in certain markets while pulling back in others based on ROI trends. There are promising opportunities on some social platforms, particularly on iOS right now, while Android has been less favorable recently, a trend we've noticed over some time. We're adjusting our strategy while keeping our return on ad spend objectives in mind. We also allocate part of our marketing budget to support new product launches. Given the timeline adjustments Anu mentioned, we’ve redistributed some marketing funds to fully back our product roadmap activities. This will account for some of the changes you’re observing.

Got it. Thanks so much.

Thank you.

Our next question will come from the line of Benjamin Black from Deutsche Bank. Your line is open.

Thanks. Good afternoon. Thank you for the question. Your competitor is obviously launching a product geared towards monetizing women. I guess the question here is do you get the sense that competition is rising in the space? And how do you feel positioned competitively? And then secondly, with the launch of student subscription tier complement virtual goods how should we be thinking about Bumble App ARPPU growth for the balance of the year and into next? Thank you very much.

Thank you so much for the question. I'll start with the competition piece. I'll break it down in two parts. I'll start just with the broader view on competition more generally and then we'll take the women piece second and then I'll turn it over to Anu on the last question. So first and foremost, we're very happy with our performance versus our competition this quarter. Based on third-party data sources, we believe that we gained download share against our major competitors in almost all of our major markets. So as I mentioned in the prepared remarks, this momentum is continuing into July. And the same data sources are showing Bumble is the number one most downloaded dating app in a number of our major markets including Germany. We believe that there is a number of reasons for this. So first of all, our brand promise and this comes to the woman piece which we'll get to in a second but our brand promise to women continues to resonate. So according to Morning Consult, we've substantially gained in our net promoter scores within US women more so than our competitors. And second, our product continues to see high and increasing engagement. This really reflects the success of our product and our marketing road maps including our increasing focus on hybrid that off-line and online approach to dating. And then lastly, we know that people are really successful on Bumble. We have a platform that we have called It Started on Bumble and this really celebrates this. So for example, we're seeing increasing integration of our brand into weddings. We receive a lot of wedding invites, engagement announcements, and baby announcements at our office. This generates that word of mouth, which then in turn drives organic growth. So all of these have worked together to create what we believe is this unique ecosystem. That's all to say, we are really gaining market share in this organic way and this is sustainable over the long-term. This really resonates on a global level. So let's move to the women piece. We are first and foremost very grateful to see the larger Internet space taking an interest in making the Internet safer for women. We of course support that. That said the safety of women on these platforms cannot just be a road map add-on or an afterthought. So since starting this company in 2014, our consistent goal has been to make dating better, kinder, and safer for women and this is truly at the foundation of everything we've done. Therefore, we've earned our stripes by being known as this woman-first brand. That is not something that can be replicated easily. And we don't believe it can be replicated at all. This is really why we have such a strong audience amongst women and a high propensity to pay and an industry-leading NPS score with women. So that all to say and to conclude just turn it over to Anu, we have not seen a large impact to date from competitors' add-ons for women. And we believe that it's really what I just attribute that to is that it's just not fundamentally focused in their DNA. So over to you Anu on the revenue bit.

Speaking on ARPPU, again as I've said before, we largely expect it will be flat year-over-year on ARPPU. Obviously, foreign exchange will play a part in it and then again some of the lower price offerings that we have will also play a part in it. So again, nothing has really changed fundamentally from what we've said before. On a full year basis, I expect Bumble will be around the flat ARPPU range that I had provided before.

Great. Thank you. Thanks for all the color.

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

Great. Thanks. Just curious, if you could provide an update on the Fruitz acquisition? And more broadly if you could discuss kind of how you're thinking about potential M&A opportunities? Thank you.

Sure, I'll begin with an update on our M&A strategy and then provide a brief overview of Fruitz. We remain very optimistic about our organic growth and its potential. As demonstrated by our acquisition of Fruitz, we are open to pursuing M&A opportunities that align with our mission, strategy, and shared technology and marketing platforms. There are five key considerations for us regarding M&A. First, mission alignment – does it facilitate meaningful connections? Second, does it bring a new engagement model that we currently don't offer at scale? Third, does it access a new geography or a hard-to-reach user base? Fourth, does it contribute tech or talent while being financially accretive? Fifth, does it capture adjacencies close to our core dating and connection business, thereby extending total addressable market and lifetime value? We see attractive opportunities in these areas and are actively exploring them with a focus on being opportunistic. Our strong balance sheet and favorable relationships with founders enhance our capacity for more acquisitions. Founders are often intrigued by our mission alignment and shared infrastructure that can support their scaling and monetization efforts. As always, we will maintain a disciplined approach. Now, regarding Fruitz, Q2 represented our first full quarter with the app since we acquired it in January, and it has been seamlessly integrated into our group. Fruitz is benefiting from the expertise of Bumble Inc., concentrating on key areas like safety, content moderation, data science, AI, and monetization. We see significant potential for Fruitz, which has become the second most downloaded app in France as of May, competing vigorously for the top position. Its growth has been primarily organic, and we are confident in our ability to unlock further growth opportunities moving forward. Fruitz’s key differentiator emphasizes intentions, honesty, and transparency in dating; users select a fruit to indicate their relationship intentions, allowing for aligned matching, which is closely tied to our mission.

May I ask a follow-up?

Sure. Certainly.

So, would you or any of the offering to the Bumble app or Badoo?

It's very interesting, and this is part of our shared resource infrastructure. We can evaluate which features and functionalities are effective in one product compared to another. There are opportunities to test and iterate on that in new markets, with new audiences, and even across platforms. In the future, we will definitely explore testing on other products. Right now, we are very excited about what we are seeing with that product and look forward to its journey toward scaling.

Thank you. That is all the time we have for Q&A today. This concludes today's conference call. Thank you for participating. You may now disconnect. Everybody have a great day.