Bumble Inc. Q3 FY2022 Earnings Call

Good day and thank you for standing by. Welcome to Bumble's Third Quarter 2022 Conference Call. 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.

Thank you, operator and thank you all for joining us to discuss Bumble's third 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.

Thank you, Cherryl and thank you all for joining us today. Our Q3 results demonstrate the strength and resilience of our brands and our business amidst a challenging global operating environment. I want to lead by restating that love is a universal and fundamental human need. How we deliver for this global need evolves, but we are well positioned to deliver for our members at scale. In the third quarter, we delivered solid top line growth of 17% year-over-year, driven by 28% growth for Bumble App. Adjusted for both FX and the Ukraine complex, Bumble Inc. revenue growth would have been 10 points higher and Bumble App revenue growth would have been 5 points higher. We maintained a strong focus on cash flow and profitability, delivering record adjusted EBITDA of $62 million in the third quarter, surpassing our outlook. Bumble App continued its momentum in Q3, gaining download share in both core and international expansion markets while exceeding our expectations for both new user growth and reengaged users. Monetization was also strong as paying users accelerated for the fourth consecutive quarter to a record 164,000 sequential net adds. International expansion continued to propel Bumble App's growth with strong increases in users and payers across Western Europe, Asia Pacific and Latin America. Our strategy and new management structure for Badoo are starting to deliver and we have made progress in stabilizing to do. Sequential net adds increased for the first time since Q4 2021 and we achieved positive revenue growth after adjusting for the impact of FX and the conflict in Ukraine. We achieved these results against the backdrop of a very uncertain geopolitical and macroeconomic environment. While these results are strong, our third quarter revenue adjusted for FX headwinds came in just shy of our previous expectations. There are 2 factors that drove this which will also impact Q4. Now let me provide more context for each. First, in Q3, we encountered some design and user engagement issues related to new product launches on our core profile page. As a result, we made the decision to delay these launches, including monetized complements. That's our message before match feature. We have addressed the issues and these features have started rolling out 8 to 10 weeks behind plan. Notably, fully monetized complements is now live in Australia, Germany, Canada and parts of the U.S., including New York and New England. We anticipate completing the U.S. rollout and progressing to our remaining markets throughout Q4 and into early 2023. Our results were also impacted by the increasingly challenging macroeconomic environment in late Q3 and Q4. User engagement and new user growth are strong in both our core markets and our international expansion markets. Importantly, we have seen no impact on new subscriptions. However, some of our user segments are facing greater pressure on disposable income and these segments are renewing their subscriptions at a modestly lower rate. We are actively adjusting our marketing approach to ensure that we highlight the comparative value of our offerings to other dating alternatives and modifying our merchandising and payer retention strategies. Notwithstanding these items, our business remains strong. Bumble App revenue grew to $181 million in Q3, up 28% year-over-year. Paying user growth remained strong in Q3, with sequential net adds accelerating to 164,000. We continue to grow download share in both core and international expansion markets with share gains across all of our major regions and strong year-over-year performance in the U.S., Canada, U.K., and Australia. Notably, we are continuing to see strength in our Gen Z user growth in both our core and our international growth markets. According to the research group, Bumble has the highest net brand favorability and Net Promoter Scores with the 18 to 29 and 30 to 44-year-old segment is the major dating brands that they track in the U.S. This speaks to the unique strength of our brand, which is the foundation for the strong performance that we have delivered all year. International expansion continues to be a critical growth driver for Bumble App. In Western Europe, we saw robust user growth and even faster revenue growth. We remained the number 2 dating app in Germany, closing the gap significantly with the number 1 player, and we gained download share in Austria, France, Switzerland, Belgium, and the Netherlands. Spain is our most recent launch in the region, and we have seen significant growth in registrations, MAU and revenue since early July. Our Latin America and Asia expansion are performing well. India remains a notable highlight and revenue in India more than doubled year-over-year, again, demonstrating the broad global appeal of our brand and product. Between now and the end of 2023, we will build on our proven playbook to continue to actively expand internationally. We expect to complete our major launches in Europe and critically to continue to deepen our presence in each of our recently launched markets. In addition, we expect to continue our rollout in Asia and Latin America. Outside of the products already noted, Q3 was a very active product launch period for us, that are serving the wide range of audiences on Bumble has been a key focus. We launched improved experiences for users who want to celebrate their cultural heritage and we improved the experience for our LGBTQIA+ audience. We also launched Tuesday offerings which drove strong engagement with 18 to 30-year-old women, particularly, we expect to continue building on this platform. We've also been focusing on developing an improved experience for our college and recent graduate communities, and we are rolling out student-only experiences for verified college students. Our first college monetization offering launched in late August, and we are pleased with the initial results. In Q3, we also introduced our speed dating feature in select cities around the world, who utilize the product functionality to launch our partnership with Emmy award-winning comedy 'Ted Lasso,' with Banter Live by Bumble, we are bringing the fictitious dating app feature on the show to life, creating an innovative and fun way to grow and further engage Bumble users in our core English-speaking markets. Banter Live takes place on Thursdays each week through the remainder of the year. We are pleased with the initial participation results that we've seen and we're excited by the new engagement model that this product represents. Now looking forward to 2023, we expect to continue our rapid pace of product development. Our product focus will include enhancing the college and recent crowd experience, continuing to build on the complements and speed dating platforms that we've launched, leaning into social features, such as our recently launched recommender Friend feature and building out new monetization platforms at both the low end and high end. Now turning to Badoo and other products, including Fruitz. Badoo and other revenue totaled $52 million in Q3, down 10% year-on-year on a reported basis. That includes 21 points of combined negative impact from FX and the conflict in Ukraine. We have made progress towards stabilizing Badoo's performance. The sequential increase in paying users was driven by product improvement, including an enhanced talk to someone experience and a new 1-day consumable aimed at driving payer conversion for the more economically sensitive Badoo user. Over the next several quarters, we will build on these successes with additional product releases and a continued disciplined marketing approach. Let me turn next to Fruitz. Adoption continues to grow quickly in France, Belgium, the Netherlands and parts of Canada and we are actively working on its broader international expansion strategy for 2023. Since acquiring the company in January, we have integrated a significant amount of our safety capability and throughout Q3, we've been bringing our monetization expertise to that team. At the same time, we are leveraging Fruitz as a learning platform to better serve Gen Z. Finally, I would like to spotlight a couple of safety initiatives that serve as powerful reflections of our mission and our commitment to creating kind connections. First, California signed a cyber flashing bill in September that makes the sending of unwanted lewd images illegal, building upon similar legislation that we also championed in Texas, Virginia and the U.K. More recently, we open-sourced our private detector machine learning model to bring improved user trust and safety to the social media industry at large. I am so proud of how our teams are shaping our global industry for the better and I'm looking forward to more. I will now turn it over to Anu for a discussion of our financials and outlook. Thank you so much.

Thank you, Whitney and good afternoon, everyone. I'll begin with a discussion of our third quarter trends and results before turning to our outlook for Q4 and the full year. Unless stated otherwise, the comparisons I will make refer to the third quarter of 2022 versus the third quarter of 2021. Total Bumble Inc. revenue in Q3 was $233 million, up 17%, driven by growth in Bumble App. FX was a $14 million headwind to top line, $2 million worse than we had expected at the time of our guidance. In aggregate, FX headwinds and the Ukraine conflict impacted our Q3 growth rate negatively by 10 percentage points. At a group level, revenue growth was driven primarily by growth in paying users which increased 15% to $3.3 million, while our people increased by 1%. Revenue from Bumble App grew 28% to $181 million. FX was a $7 million year-over-year headwind which negatively impacted growth by 5 percentage points. FX headwind was $1 million more than we had previously expected. Bumble App revenue growth was driven by a strong 36% increase in paying users to $2.1 million. On a sequential basis, we added 164,000 paying users marking the fourth consecutive quarter we've increased net adds. The strong growth in paying users was driven by a number of factors, including active user growth from high reengagement rates, successful international expansion and product enhancements that drove paid conversions. Bumble App's ARPPU was $28.84, down 6% year-over-year and 1% sequentially, primarily due to country mix and FX impacts, partially offset by pricing optimization initiatives. Now moving on to Badoo App and other. Badoo App and other revenue declined 10% in Q3 to $52 million. FX and the Ukraine conflict represented a $12 million headwind year-over-year which negatively impacted growth rates by 21 percentage points. FX headwind was $1 million worse than we had expected. Absent these headwinds, Badoo App and other revenue grew double digits year-over-year. Badoo App and other paying users declined 10% year-over-year to $1.2 million but grew sequentially by $106,000. Badoo App and other ARPPU declined 7% year-over-year to $12.75 due to FX and country mix, partially offset by pricing optimization work. 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. Turning now to expenses. We continue to remain very focused on managing our business profitably, especially in light of the current geopolitical and macroeconomic environment. Total GAAP operating costs and expenses were $204 million for the quarter, down 1% 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 $171 million, up 18%. Cost of revenue was $64 million and grew 17% 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 27%, flat versus the year-ago period. Sales and marketing expenses grew 16% year-over-year to $61 million. This represents 26% of revenue, flat versus the year-ago period. G&A expenses were $30 million or 13% of revenue compared to $24 million or 12% of revenue last year. Product development expenses were $16 million or 7% of revenue, flat versus the year-ago period. Q3 GAAP net earnings were $26 million compared to a net loss of $10 million in the year-ago period. And Q3 adjusted EBITDA was $62 million, up 13% year-over-year and represented a 27% margin. We generated $34 million of free cash flow this quarter. We have a strong cash position and ended Q3 with total cash of $365 million. We continue to maintain strong financial discipline with regards to potential uses of cash. Now moving on to our outlook. We expect the following for Q4. Total revenue between $232 million and $237 million, representing a growth rate of 12% to 14% year-over-year. Our outlook assumes $16 million of year-over-year FX headwinds, $6 million more than we had previously estimated. Our outlook also assumes approximately $5 million of year-over-year headwinds related to the conflict in Ukraine, primarily in Badoo. Excluding the impact of FX and the Ukraine conflict, our total revenue growth outlook would have been 22% to 25% year-over-year. We expect Bumble App revenue to be between $184 million and $187 million, representing a growth rate of 23% to 25% year-over-year. The revenue outlook assumes a negative impact from FX of approximately $9 million, $4 million more than we had anticipated originally. Excluding FX headwinds, our guidance for Bumble revenue growth would be 29% to 31% year-over-year. We estimate adjusted EBITDA will be between $57 million and $59 million, representing 25% at the midpoint of the range. Our Q4 expectations are based on 3 considerations. First, we expect FX to continue to be a headwind across all our apps. Second, while Bumble App is continuing to demonstrate strong user engagement, product delay and macro issues will weigh on Q4 results. And lastly, on Badoo and other, we expect continued macro pressure along with lower demand for advertising this holiday season. On a full year 2022 basis, we expect total revenue growth rate of 17% to 18% year-over-year. This assumes $44 million of year-over-year FX headwinds and excluding the impact of FX and the Ukraine conflict, our guidance for total revenue growth would have been 26% year-over-year. We expect Bumble App revenue growth rate to be 30% to 31% year-over-year. The revenue outlook assumes a negative impact from FX of $23 million. Excluding FX headwinds, our guidance for Bumble revenue growth would be 34% to 35% year-over-year. We estimate adjusted EBITDA will be between $223 million and $225 million, representing 25% margin at the midpoint of the range. We are currently in the middle of our annual planning cycle. And while we typically provide full year guidance on our Q4 earnings call, given macro uncertainty, we wanted to share some preliminary expectations for full year 2023 today. While the operating environment continues to evolve, based on our current visibility on our product road map and market expansion efforts, we expect that Bumble Inc. revenue will grow between mid- to high teens next year. This has used 300 basis points of FX headwinds at current rates. Adjusted for that, we expect our total company revenue growth will be high teens to low 20s on a year-over-year basis next year. We are also committed to expanding adjusted EBITDA margins in 2023 by at least 100 basis points on a full year basis. This will be achieved by ensuring that we remain laser-focused on spend while continuing to invest in our growth priorities. In closing, we remain as focused as ever on balanced execution. We will continue delivering best-in-class experiences for our users and we will do this without sacrificing on our goals of sustainable and profitable growth for our shareholders. And with that, operator, we can open it up for Q&A.

Our first question comes from Andrew Marok with Raymond James.

I wanted to discuss the preliminary outlook for 2023. What assumptions regarding the macro environment are reflected in that outlook? Is it consistent, or is there potential for any deterioration? Also, is there any contribution from non-dating properties included in that?

Yes, sure. I can take that. So again, like I said in my prepared remarks, I wanted to mention that we are still very much in our planning stages for next year. And so the teams are actively working on what 2023 will look like. But again, like I said, given the larger macro uncertainties, we wanted to just provide everyone a preliminary estimate based again on our best guess around 2023. So like I said, our range currently is in the high teens to low 20s adjusted for about 3 points of FX headwinds. We are assuming here that Bumble App will continue to be primarily the growth driver for our business next year. And the growth levers will largely be similar to what we saw in 2022 in terms of we still expect paying users to drive growth across both our core and international markets. No, we've obviously made some reasonable assumptions around what the growth vectors look like across the different geographies based on the data that we have from historical market expansion. And we've also made some high-level assumptions about product contribution. But again, these road maps are still being built and so we'll have more detail to share when we come back in Q4. From a macro perspective, again, we've assumed that the current state continues into 2023. We've not assumed any material degradation in terms of what we are seeing. But obviously, this is something that we will be looking at very closely between now and Q1 when we come back to provide guidance. Again, our goal was to provide a high-level number but we will provide specific drivers of revenue when we come back.

Great. And one more, if I could. In this type of environment, I know you talked a little bit about your marketing philosophy in your prepared remarks. But in this type of environment, can you pull back on marketing spend? Or will you need to spend through it to defend your position? I guess is there any differences in your outlook on marketing such as channel shifts toward campus, influencer or lower-cost channels, anything like that?

Sure. I'll take that. This is Tariq. So we've always had a very disciplined approach on marketing and it's always been very ROI centric, even our brand marketing spend, not just our performance in paid marketing spend. A lot of the success we see on the marketing side is built off of the brand base and some of the stats that Whitney said about the love for our brand and the favorability that we have for our brands. So at the moment as conditions got tougher in Q3 and in the first several weeks of Q4, we haven't seen a need to change our marketing approach per se from a channel standpoint or anything like that. What we are doing is adjusting the messaging and the merchandising to make sure that we're able to really speak to our users in the context of the current environment. A lot of our messaging is working. One of our big platforms that you'll recall is 'Started on Bumble,' which is really about celebrating the success that our users have on the platform. We are dialing up some of the comparative value messaging that Whitney mentioned about Bumble, we believe, being one of the best ways to have a first date compared to cost of drinks and bars or cost of other things that you might do. So you'll see more messaging around that as well. And yes, and I don't think we're going to be seeing any substantial change in spend.

Yes. And I just wanted to clarify, I think I missed answering your question about non-dating businesses, our 2023 revenue assumptions don't include any major contributions from our non-dating business. Our goal is to test monetization strategies for our non-dating business next year. But right now, we are not baking in any big revenue contributions from that.

Our next question comes from Mark Kelley with Stifel.

Great. I was wondering if there's a way for you to maybe quantify a bit more that 8- to 10-week delay that you highlighted at the outset of the prepared remarks. Maybe just how it impacted Q3 and then how you think that impacts Q4 maybe into next year? And then would love your thoughts on just expectations for app store fees next year and beyond, given the margin outlook you gave; you're not taking any improvement into your estimates at this point. But any just high-level thoughts there would be great.

Yes. Sure. Why don't I start with the margin question and then I'll hand it over. You're right, on the app store fees, we haven't assumed any relief coming in, in 2023. So we've resumed largely current state of affairs. Obviously, we'll have to see what next year will bring in terms of changes in this front. But right now, our EBITDA 100 basis points expansion doesn't assume any additional benefit coming out of that.

And in terms of the product delays, as we mentioned, it was some of our products. We had a very robust product launch flow, if you will, in Q3. There was a handful of our products that did get delayed that had monetization implications. Most notable is complements and the paid version of complements; that is now live. So it really is that 8- to 10-week delay on a number of those features. We're not providing specific breakdowns between them but macro and the product delays are roughly even in the Q4 calculus.

Our next question comes from Cory Carpenter with JPMorgan.

Thank you for the question. Maybe one more on the product delays. Just Tara, hoping you could expand a bit on what exactly the issues were that led to the delay. And then also what you did see in testing with complements in the college bundles and what your expectations are on the monetization side? And then for new, just hoping you could expand on the Q4 Bumble app guide. Any color you could provide on what your expectations are in terms of payer growth versus ARPU would be helpful.

I'm going to try to answer your question without going into too much detail about the product. Essentially, we are launching several products this quarter that are complements needing integration into the core profile experience, which serves as the homepage for our apps. While we do personalization, it's primarily a singular experience with various features layered in. During testing, we noticed some design and user experience issues, especially among our power users who frequently engage with the app. This caused unexpected behaviors in that key segment, prompting us to pause and assess the situation. We wanted to ensure we understood the design elements and mechanics correctly, like how and where complements are positioned on the page and how users interact with them. While some features worked well overall, they didn't perform as effectively for our power users. We prioritize meeting their needs to avoid alienating any of our users. Currently, the complements have been live in Germany and Australia as our test markets, and we've recently expanded into Canada and parts of the U.S., including New England and New Jersey. We're witnessing strong adoption rates, with users sending complements and engaging with the new experience. Although it represents a shift from previous formats and involves a learning curve, we're seeing positive interaction, leading to better matches. Crucially, users seem willing to pay for this experience. The monetized version focuses on a consumables model where users pay to send beyond their daily quota, and this approach has proven effective so far, generating excitement as it represents a new interaction style within the app. We're pleased with the progress and will continue to roll it out. On another note, we previously discussed college bundles, which we delayed but launched on schedule in August and September as students returned to campus. Our strategy is to find segment-specific opportunities, primarily in areas we have overlooked in our broad monetization approach, such as targeting college students. We introduced various college monetization offerings, including a student bundle and others on a targeted basis, which have yielded a significant uplift in average revenue per user (ARPU) in those segments. We are now focused on expanding the distribution of these offerings and evolving our plans, including the introduction of virtual goods later this year and early next year, which we believe will lead to further growth. Additionally, we are implementing a college verification program to ensure that these packages are distributed correctly to eligible users.

Yes. To address your question about the Q4 outlook specifics, we've adjusted our overall guidance down by about $20 million, with $6 million attributed to additional foreign exchange headwinds. This leaves us with a $14 million difference, of which $9 million is related to Bumble and $5 million to Badoo. The $9 million for Bumble is primarily due to the previously mentioned product delay and macroeconomic factors. Our goal for Bumble app's key performance indicators remains unchanged; we still aim for 500,000 net adds by the end of the year. However, considering foreign exchange impacts and the delay of enhancements that would have driven average revenue per user, we anticipate a year-over-year decline in Bumble app users for Q4. As for Badoo, the $5 million shortfall reflects a cautious outlook regarding the macroeconomic environment, as the Badoo consumer is more susceptible to these conditions. This $5 million also accounts for a decline in advertising revenue, similar to what many other companies are experiencing. Overall, we expect to be about $1 million lower than last year in this area. These are the key factors influencing our Q4 outlook.

Our next question comes from Shweta Khajuria with Evercore ISI.

Okay. A) Could you please provide more detail on what has to happen? I understand it's a very high level and you'll do your planning, but what has as of now, assuming that macro is steady, what has to happen to get to low, I guess, high teens next year and low 20% growth rate? So what is the assumption baked in that range as of now? And I guess the second question is, could you talk about sensitivity of low disposable income consumers? My understanding was that at a high level, you've got your skewed towards the demographic that's more resilient but could you touch on that and where you're seeing that sensitivity?

I'll start with the second question and then pass it to Anu regarding the outlook. Historically, Bumble has had a more resilient user base, and we believe this resilience is still evident in most of our users as we expand globally and within our core markets. For instance, we have been quickly increasing our Gen Z user base, which significantly contributes to our download growth. Bumble is now the second most downloaded dating app in the world, particularly in these key markets, and we're offering a broad product lineup. We are noticing some price sensitivity, primarily among Gen Z and some other younger users. Currently, this sensitivity involves users reconsidering their purchases. However, we are not experiencing any decline in initial subscription rates within these price-sensitive groups. To be straightforward, the question for these users is when they reach a limit in their finances and start contemplating whether to continue or not, which is affecting their renewal rates. This situation is quite specific to certain parts of our user base rather than being widespread.

Yes.

In terms of expectations, we are still in the early stages of providing an outlook. At a high level, we are noticing some macroeconomic influences affecting certain areas of our business. We anticipate that this trend will continue. Comparing September to October and November, we experienced significant impact in September, but the trends have not worsened in October and November. Therefore, we are assuming a steady situation for next year. If the macroeconomic conditions deteriorate, we would likely adjust towards the lower end of our guidance. On the higher end, we have made our best estimates regarding the international markets we are considering, focusing on specific products for next year, although the timing of these plans is still being finalized. The probability of each product will influence how close we get to the high end of our guidance. We are also looking forward to products like Fruitz, which has concentrated on integration this year, but we expect monetization to begin next year. Additionally, we aim to stabilize Badoo, which showed some improvement in Q3, although macro factors may pose challenges. Overall, we have many plans for our products, and we feel confident about our guidance range. We will refine our outlook in a few months.

Okay. And if I may...

Thank you. Go ahead.

Actually lost you there for a second.

Yes, sorry about that. Just a follow-up. You said October and November to date was stable. So your guidance, does that assume any deterioration from now to the end of the year going forward? Or Q4 guidance assumes what you see now to stay the same?

Yes. So Q4 guidance assumes what we are seeing now which is, again, remember, lower than what we had seen back in July and August. So we've assumed that, that stays but we'll obviously keep a pretty close eye on it. But right now, we feel pretty good based on the numbers that we are seeing for October and November in terms of where we are with respect to guidance.

Our next question comes from Alexandra Steiger with Goldman Sachs.

So Whitney, maybe one for you. In your prepared remarks, you mentioned that you're addressing some of these macro headwinds that you're seeing by changing some of the product marketing. Can you just elaborate on these product changes a little more? And how fast do you think changes could offset some of the impact you're seeing? And then second, maybe just on like the Badoo segment, what is the new management team most focused on from like a product perspective, and what gives you confidence that we can see revenue reacceleration into '23 from that segment?

Thank you for your question. I’d like to begin by discussing our approach to changing our product and marketing strategies. When comparing the cost of our product to other dating alternatives, our pricing is very competitive. For instance, our weekly boost subscription costs less than a beer at a bar in New York City, and the expenses for multiple dates can accumulate quickly. Therefore, we are focusing on demonstrating the value of our subscription model compared to traditional dating methods. This strategy is resonating with our customers. We are also adjusting the way we present these experiences to better align with our customers' evolving needs. This may involve offering shorter subscription options instead of long-term commitments. However, I want to stress that this is not a one-size-fits-all strategy. There are still customers who desire high-end offerings and curated experiences, and we are capable of catering to these segments effectively with our new capabilities. The introduction of the college bundle highlights our approach. It’s not just targeted at college students; it’s about how we can combine our monetization and product offerings to enhance the experience for our key demographics. For instances where users may have less disposable income, we aim to provide consumables and subscription options tailored to their needs, while also catering to those seeking premium experiences. This is part of a hybrid product marketing strategy that emphasizes the relative value we offer. I want to reiterate our strong belief in the continued demand for dating services. Our registration numbers reflect that there is no decline in demand for this product. Regarding Badoo, we are excited about the new focus from the leadership team, which has streamlined ownership and improved efficiencies. While we are encouraged by Badoo's performance in Q3, we recognize there is still work to do to accelerate growth. We anticipate that Badoo's user base, which is more sensitive to economic conditions, may continue to face challenges due to the current macroeconomic climate. Thus, our main focus for the upcoming year is on enhancing monetization and introducing new product features designed for this audience, including a new Discover feature that will offer daily compatible suggestions before the end of this year. Overall, we are pleased with our progress and committed to maintaining our product focus to sustain positive momentum.

Thank you. One moment for our next question. Our next question comes from Laura Champine with Loop Capital.

On the initial outlook for next year's revenues to grow in the teens range, how does that compare to your thoughts on the long-term opportunity for Bumble Inc.'s total company revenue growth?

Maybe I'll start with that and others can join in. We have previously discussed the market potential in online dating and the broader social connection space, including BFF initiatives and similar areas. The growth rate of the Bumble app gives us ample reason to be optimistic about continued international expansion and market opportunities driving future growth. Additionally, we see potential with other apps like Badoo and Fruitz, as well as future developments. We believe there’s significant potential in online dating and the connection sector. While we aren’t speculating about 2026, we see substantial opportunities both from market trends and our performance in gaining market share.

Just on a more Bumble App basis. I think what's really exciting and remarkable and you're seeing very early indicators of this complement. You look at the historic nature of how the product works given this powerful brand functionality and core user proposition of a woman making the first move. This is the foundation of our business and this is so strong and core to our future but we've never had any really interesting forms of engagement pre-match. And so when you think about the product unlock in the year ahead and the years ahead, there's exciting opportunities there as well.

And our next question comes from Benjamin Black with Deutsche Bank.

Great. It'd be great to hear your perspective on how Bumble App KPIs have trended in some of your newer international markets. And how should we be thinking about the timing of new international launches from here? And secondly, Whitney, you spoke a bit about the product roadmap for Bumble App next year. Could you just dig a little bit deeper into what we should expect in 2023? And how should sort of the newer product suite sort of impact the model should be drivers of conversion? Or should we have a bigger impact on RP2?

Sure. I'll begin with the international growth aspect and then hand it over to Whitney for the product details. I’ll concentrate on Western Europe, though I'm open to discussing other markets. As we enter these markets, we focus on establishing our brand. The positive perception of our brand creates a strong foundation for organic growth across all our international markets. We see a core of organic growth that we can build upon, rather than relying solely on extensive marketing efforts. We prioritize laying that organic groundwork, which then gets enhanced with our marketing efforts, creating a beneficial cycle. For instance, in Germany, we start with strong and increasing brand preference, which contributes to robust organic growth, and the overall ecosystem continues to expand. We often highlight new registrations, which remain very high. Third-party data on download share shows that, even amidst significant competitive spending, we are gaining ground in that market, approaching the top position as Whitney mentioned. Additionally, we observe high reengagement rates; users who temporarily leave the app tend to return frequently. We are building brand preference and experiencing improved retention rates. Monetization and payment dynamics develop over time, as we require a critical mass to make payment options valuable. This pattern is evident in the DAC region, France, and also, as Whitney indicated, is emerging in Spain where we just launched in July. We believe this approach can be applied quickly in various markets. Organic demand exists in many markets where we haven't yet launched. We cultivate this through product localization and our global brand initiatives, making it relatively easy for us to enter a market like Spain and boost existing interest. We plan to complete our launches in Western Europe next year and are making rapid progress through major markets in Latin America and Southeast Asia. We are also exploring a few other regions closely, and we will provide more concrete plans in Q1.

So now turning to Badoo product strategy. So we've had an exciting year to date with product launches and innovation. And looking ahead, we feel great about our roadmap. So in 2022 to recap, we spent a lot of time advancing our offerings, specifically as it relates to leveraging technologies such as machine learning and AI to deliver product experiences that drive safety and trust and relevance. So as we look to the year ahead, we're really taking a two-pronged approach to product development. I want to underpin that by saying we do not carve out safety and women first initiatives as a lane or as a car of our strategy; it is the underpinning of everything we do. So as I talk you through this two-pronged approach, please note that women first, safety, and kind connections is baked into this entire strategy. So that said, we are going to be focusing on: one, driving engagement and two, increasing monetization. Both of these things will just increase the overall health of the ecosystem. So on engagement, 2023 is all about building products that cater to our user demographics' specific wants and needs. Dating is not one size fits all. And we have active and rapidly growing user bases in so many different cohorts and segments. So we are prioritizing experiences that are particularly focused on delivering these unique and engaging experiences that really resonate with these cohorts and specificity. So Gen Z users, for example, socialize and they engage much differently than millennials do. That doesn't mean they don't use our product and don't want to, but there is nuance in how they do it and what the intentions are behind it. Therefore, we're going to be giving them product that really resonates and virality within their group. We will continue to innovate for our millennial users as well, of course. There is just huge demand and upside for that segment and they want things like curated offerings, and we see this opportunity to really continue to engage with that group around those offerings and to further expand those. So now turning to monetization, we are taking a barbell approach. So when we look at higher-tier and longer-duration products for more affluent customers, we can still think about this shorter duration and lower care offering and consumables for users with limited or more limited spending power than that first group. So for example, complements are live in New York and New England as we speak. We'll be continuing to roll these out to the rest of the U.S. but with nuances and, of course, the world. But with nuance for these different groups, college bundles are also live, and those have been resonating well. So those are two examples of how we can kind of target these different groups. So with engagement and monetization at the front and center of this product roadmap, we will really just continue to lean into great experiences, premier experiences. We believe that this approach will position us to advance our lead with Gen Z users which is so important while driving monetization in the year ahead with both categories.

Our next question comes from Lauren Schenk with Morgan Stanley.

Okay, great. Maybe just following up on a couple of the earlier questions. In the initial '23 outlook, what's sort of the underlying assumption in terms of Bumble App revenue growth for '23? And then just coming back to marketing, as you think about some of your largest competitors sort of increasing their spend and being more present in the marketing backdrop next year? How are you thinking about sort of your marketing spend on a year-over-year basis?

Yes. We are not going to provide specific numbers for Bumble App at this time, but we will share details when we issue formal guidance. I believe Bumble App will continue to be the primary driver of growth next year, and the growth will significantly depend on the number of paying users within the app. Regarding our spending approach, we are committed to increasing our long-term margins, which we have shown this year. Next year, we aim to expand our margins by at least 100 basis points. Our spending philosophy will focus on critical areas for business growth, particularly in product and technology, including investments in AI, machine learning, and data engineering. We will continue to invest in the parts of the business that are essential for us. In terms of marketing, international growth remains a significant driver of revenue, and we will allocate funds there; however, we are also carefully evaluating every aspect of our marketing expenditures to ensure that our investments meet our high ROI thresholds. We expect to see leverage in this area, while also making necessary investments in targeted growth opportunities. Additionally, we have built up our infrastructure since going public and are largely satisfied with our progress, though there are still some areas that require investment. In regard to general and administrative expenses, we are also looking to create leverage next year. Finally, due to current global circumstances, we will have a very high bar for increasing headcount next year and funding initiatives within the company. We anticipate that our growth in headcount will be significantly lower than in previous years, but we remain focused on investing appropriately. Overall, our standards for the company and our objectives will be very stringent, and I look forward to providing more specific information in a few months.

On the marketing side, we have a unique approach that isn't typical in the industry, with a strong focus on both micro and brand elements. Even in Q3 and Q2, we observed a significant amount of competitive spending, yet we have continued to gain market share by leveraging our historically differentiated marketing product. We are confident that we can maintain this trend.

Thank you. This concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day.