Bumble Inc. Q1 FY2023 Earnings Call

Thank you for standing by. My name is Sydney and I will be your conference operator today. At this time, I would like to welcome everyone to the Bumble Q1 2023 earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. Thank you. I now pass it over to Cherryl Valenzuela.

Thank you, operator and thank you all for joining us to discuss Bumble first quarter 2023 financial results. With me today are Whitney 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 factors and risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our earnings press release and filings with the SEC, including our annual report on Form 10-K for the year ended December 31st, 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 good afternoon everyone. Thanks for joining. We are off to a great start to the year, delivering strong revenue growth and paying user additions in Q1. Total Bumble Inc. revenue of $243 million grew 16% year-over-year and was at the high end of our guidance range. Revenue growth was fueled by both payers and ARPPU. Total paying users increased 15% to reach 3.5 million and ARPPU grew to $22.83. We achieved strong profitability with adjusted EBITDA of $59 million, representing a 24% margin, which exceeded our expectations. Our results demonstrate that online dating remains a healthy, attractive and high-growth market driven by powerful secular trends on an increasingly global scale. According to a Stanford study, which was updated recently, online dating has surpassed more traditional mechanisms to become the top way for heterosexual adults in the US to meet their romantic partners. This trend continues to grow in the US as well as around the world, driven by advances in technology, digital-first demographics, and shifting cultural norms. We at Bumble see this trend every day, and we feel very fortunate to be a rare technology business that brings people together in real life. Earlier this week, the Surgeon General issued an advisory calling attention to the devastating impact of the epidemic of loneliness, isolation, and lack of connection in the United States. In the face of this public health crisis, our work is more critical and more important than ever before. Just the other day, the team and I had the chance to dig through overflowing boxes of engagement, wedding, and baby shower invitations that have been sent by successful Bumble users to our headquarters in Austin. It is so rewarding to see the impact on the community that our products, team, and our mission brings to life. This also speaks to the ongoing market momentum we see. Bumble, Badoo, and Fruitz remain among the leading apps in their core markets. This is reflected in the strong underlying demand we have seen in 2023 to date, with encouraging registration and download trends in most of our global markets, as well as the continued success of our brand, product, and monetization initiatives. Our team is delivering these results with a strong focus on operational efficiency. Over the last several years, we have been committed to expanding margins and have placed a high emphasis on managing our OpEx growth. We have demonstrated that our playbook focusing on durable growth delivers strong global expansion and high-quality user experiences. We have maintained this approach even in the face of elevated competitive marketing spend. While operating efficiently, we remain committed to investing in the future. There's a lot of talk about AI these days, and our teams are active in a number of areas. For us, this is not a new topic or focus. For years, we have been leveraging AI in our apps across safety, content moderation, our recommendations engine, and our personalization and monetization efforts. These results have driven real impact across the user experience. For example, the new AI-first algorithm that we mentioned last quarter increases the probability of a woman saying yes to a profile by five times. This is just the tip of the iceberg in using AI to improve our curation and the quality of the connections that we can make. Our product, engineering, and marketing teams are baking AI into their key initiatives instead of it being a sideshow. For example, there are active efforts looking at how we can use the available toolkits to improve our marketing and software development effectiveness. We're also in the early stages of exploring AI assistance to help you improve your bio, get first date recommendations, or select the best photos to showcase on your profile, among many other optimization opportunities. We look forward to providing updates in the future. Now, let me turn to updates for each of our apps. First, Bumble App. In Q1, Bumble App revenue reached $194 million with 98,000 sequential net adds in paying users. These results are a reflection of strong execution against the strategic priorities that I outlined in our last earnings call, namely international expansion, product innovation, and safety by design, as well as robust top-of-funnel demand. Starting with international expansion, we continued our market momentum with download share gains across both core and new markets across all of our priority regions, including Western Europe, Latin America, and India. This is in spite of very elevated levels of marketing spending that we're seeing from our global competitors. We are very proud of the results our team has driven in this environment while maintaining the spend and ROI discipline that we are known for. Looking at downloads for the full quarter in Q1, Bumble was the most downloaded dating app in the UK and Canada, in a virtual tie in Germany, and a strong second place position in the US, France, and Benelux. We continue to maintain strong traction in India and our key markets in Latin America and Southeast Asia. As a reminder, our marketing playbook is focused on building durable, organic market positions on the strong foundation of our authentic women-led safety-first brand. Our net brand favorability with women in the US, UK, and France, especially for the critical Gen Z segment, is the highest of all major dating apps tracked by an independent brand research group. This results in strong download share that translates into retained active users, high levels of engagement, customer success in word-of-mouth, and robust revenue growth. We are also on track with Bumble's exciting product roadmap this year. While we continue to focus on refinements of our existing products and further optimizations across pricing, targeting, and user experience, delivering new product innovation is critical to our brand strength and long-term growth. Here's a recap of some recent highlights. In Q1, we completed the full rollout of Compliments in all markets. We are seeing revenue contribution continuing to ramp and we're now focused on accelerating adoption of this feature, as well as driving incremental paying user growth. We are live in several key markets with our best fees offering. As I mentioned earlier, this offering uses our new AI algorithm to provide a higher level of curation for our members. Available today in a number of markets in Western Europe, we're excited by the early traction that we're seeing in terms of high levels of user engagement and matching. We are testing both subscription and consumable-based monetization approaches for this and expect to accelerate rollout over the next several months. We have also seen positive results from enhancements that we've made to our Speed Dating feature. This enables members to meet and chat in an anonymous and more playful and low stakes format first before they're prompted to match. We've been able to increase the frequency of these events without losses in participation, while simultaneously exploring monetization through both sponsorship and ticketed events. As we always do, we are actively experimenting with a number of new user engagement monetization initiatives. These are generally small-scale experiments that let us learn how to improve the health of our business. A good example of this is a new product we're testing, which is a potential subscription tier priced below Bumble Boost and aimed at Gen Z users. The emphasis is on offering new services to help our users better express themselves, whether that be through additional compatibility assessments, stickers, virtual gifts, and photo effects. We expect to roll this out later this year and into 2024, and as always, we will do all of this with a safety-by-design approach. We will continue to take a comprehensive approach across product, policy, partnerships, and people to ensure that our users, especially women, continue to feel safe and empowered on our apps. Now, turning to Badoo. Badoo and other revenue totaled $49 million, down 13% year-over-year. We remain confident in Badoo as it remains the leader in key markets and a top three app in many countries across Europe and Latin America. Badoo continues to be one of the top-rated scale dating apps on the App Store and on the Google Play Store. While we still have work to do to further stabilize Badoo and return it to growth, we are encouraged to see registration and reengaged users growing in several key markets. Our focus remains on shoring up retention and increasing engagement by focusing on quick, authentic, and feel-good connections, which are the hallmark features of Badoo and what its loyal users love most about the platform. We are currently testing a new Badoo experience built around different discovery mechanics, which significantly speeds up the time it takes to get a quality connection. Finally, on Fruitz, the team continues to execute well on their product roadmap, demonstrating strong growth in its core French-speaking markets. We believe the power of this product with Gen Z remains a unique differentiator and we're also incorporating lessons learned from it in Bumble and Badoo. For example, we've leveraged some of Fruitz's Gen Z pricing and targeting strategies in Bumble. The Fruitz product roadmap is very exciting, drawing on experiences that are gaining traction in social media apps. And we believe these innovations will help it drive even greater market share in its home markets. In Q2 and Q3, Fruitz will also be taking its first steps into global expansion. Again, emphasizing the organic growth model that leads to a durable market position and favorable economics. In closing, our mission today remains the same as it was when I founded Bumble in 2014, to make relationships better, more equitable, and healthier for women in an effort to make relationships better for everyone. I firmly believe that we are making progress towards that mission every day on a global scale. The demand for love and connection is stronger now than ever before, and we believe our products deliver for this demand in a unique, safe, kind, and differentiated way with strong customer loyalty. I am fully committed to this vision over the long term. I have never been more excited about the future of our business. Deep gratitude and thanks to team Bumble Inc. as always for your dedication and hard work and to our customers, partners, and investors for your continued trust and support. With that, I will now turn it over to Anu for a discussion on our financial results and outlook.

Thank you, Whitney and good afternoon everyone. I'll begin with a discussion of our first quarter results before turning to our outlook for Q2 and full year 2023. Unless stated otherwise, all comparisons are on a year-over-year basis. Total Bumble Inc. revenue in Q1 was $243 million, up 16%, and at the high end of our guidance. FX was a $7 million headwind for the quarter and combined with headwinds from the war in Ukraine, impacted our growth rate negatively by five percentage points. Total Bumble Inc. revenue was driven by paying user growth of 15%, primarily from Bumble App, and ARPPU growth of 1%. Revenue from Bumble App was above the high end of our guidance range at $194 million, up 26%. FX headwinds negatively impacted growth by three percentage points. Bumble App revenue growth was driven by a 31% increase in paying users to 2.3 million. On a sequential basis, we added 98,000 paying users resulting from strong growth in monthly active users, as well as increases in payer penetration. Bumble ARPPU was $27.93, down 4% year-over-year. This was primarily driven by FX headwinds and impact from country mix. Now, moving on to Badoo App and other. Badoo App and Other revenue was $49 million, down 13%. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rate negatively by nine percentage points. Badoo App and Other paying users, excluding Fruitz, declined 7% to 1.1 million. Excluding the impact of our exit from Russia and Belarus, Badoo paying users would have grown over 2%. As Whitney mentioned, we believe we are making progress in stabilizing Badoo. On a sequential basis, paying users dropped 47,000 in Q1. Badoo App and Other ARPPU, excluding Fruitz, declined 7% to $12.47, primarily due to FX. Turning now to expenses. We are more focused than ever on managing the business profitably with a high bar for incremental spend and headcount. We are pleased with the profits we have made in the first quarter towards our margin goals for the year while also achieving our topline objectives. We continue to believe we have room for further leverage in our business and remain committed to expanding margins in the long term. Total GAAP operating cost and expenses were $234 million for the quarter. On a non-GAAP basis, excluding stock-based compensation and other non-cash or one-time items, our total non-GAAP operating expenses were $184 million, up 15%. Cost of revenue was $69 million and grew 27%. The increase was primarily driven by higher App Store fees as revenues have grown, as well as shift away from third-party billing to Google Play on Android. As a percentage of revenue, cost of revenue was 29% versus 26% in the year-ago period. Sales and marketing expenses grew 3% to $60 million. This represents 25% of revenue versus 28% in the year-ago period as we focused on efficiency in marketing spend during the quarter and stayed disciplined on ROI thresholds across all campaigns. G&A expenses were $32 million or 13% of revenue compared to $30 million or 14% of revenue last year. Product development expenses were $23 million or 9% of revenue versus $18 million or 9% in the year-ago period. Q1 GAAP net loss was $2 million compared to net income of $24 million in the year-ago period. Q1 adjusted EBITDA was $59 million, up 19%, and represented a 24% adjusted EBITDA margin. We ended the quarter with a cash and cash equivalent balance of approximately $389 million, down from Q4, primarily due to timing of receipts. Now, moving on to our financial outlook for Q2 and full year 2023. For Q2, we expect the following: total revenue between $254 million and $258 million, representing a growth rate of 17% year-over-year at the midpoint of our range. We expect Bumble App revenue to be between $205 million and $208 million, presenting a growth rate of 23% year-over-year at the midpoint. Our Bumble App revenue guidance includes expectations for sequential net adds of approximately 120,000 to 130,000 in Q2. We expect Badoo sequential net adds to be flat to slightly positive in Q2. We estimate adjusted EBITDA will be between $62 million and $64 million, representing a 25% margin at the midpoint of the range. For full year 2023, our view on full year expectations has not changed since our last earnings call. We maintain our estimate for total Bumble Inc. revenue to grow between 16% to 19% year-over-year. We are pleased with the performance of Bumble App so far, and we maintain our expectations for revenue growth rate of between 22% to 25%. With regard to full year adjusted EBITDA, we expect at least hundred basis points of year-over-year margin expansion. Today, we announced that our Board of Directors has authorized a share repurchase program for up to $150 million of our outstanding Class A common stock. We have a strong liquidity position with low net leverage and continue to generate free cash flow. Our priorities from a capital allocation perspective remain to invest in growing the business organically as well as pursuing M&A opportunistically. Beyond these investment opportunities, the share buyback program provides flexibility and allows us to return capital back to shareholders. To summarize, we achieved strong topline growth this past quarter while staying disciplined with our expenses. We believe we are in a good position to continue gaining market share amidst the dynamic and competitive environment. And we are excited about our product roadmap for the year. We plan to carry forward the business momentum we have built in the first quarter through the rest of the year.

Thank you. Our first question comes from Alexandra Steiger.

Thank you for taking my questions. Could you maybe dive a little deeper into the progress you're making in the various international markets developed versus emerging given the elevated competitive marketing spending you mentioned? And how should we think about the pace and cadence of new market launches versus prioritizing existing regions for the remainder of the year? And then maybe second, can you just remind us of your philosophy around pricing increases or optimizations? Is there room to optimize pricing in this type of environment? Thank you so much.

Hey, Alex. It's Tariq. Thanks so much for the question and I'll try and tackle both of those. I think as it relates to international expansion, we remain very pleased with the progress that we're making in our international markets. I think it continues to be a source of strength for the business. And we are seeing as Whitney mentioned, we're seeing continued traction from a download share standpoint as well as just continued absolute levels of growth really throughout Western Europe, throughout the markets we've launched in Latin America, in India, and in Southeast Asia. We are seeing that our focus on what we internally refer to as durable growth, meaning this notion of let's build an organic base in these countries, let's make sure that we do that in a way that generates the word-of-mouth and virality that we need in these countries so that you build resilience into the growth model, that model really does work, and continues to work really well. It has made us, we think, quite resilient in the face of very elevated levels of marketing spend that a number of our competitors are putting into market. What we've seen is, even when you do see those elevated levels of spend, it's not really diminishing the trajectory that Bumble has in those markets. So, we feel very good about our position. Again, our focus is very much on getting the downloads and converting those users into active users who are willing to engage at a high-quality level and are eventually willing to monetize. So, we're very pleased with that. In terms of the cadence, we are pleased with the progress we've made in Western Europe. There are a couple of more countries in Western Europe where we've got some more work to do. We launched Spain later in the year last year. We're continuing to focus there. Italy, the Nordics, and some parts of Central Europe are a real focus this year, but I do want to reiterate that the job is only just getting started when we launch into a market, and it really is about building depth in that market. That's where that's the million-dollar, if you will. And so we're really focusing on that. You'll see us continue the focus we have on parts of Latin America and Southeast Asia as well, but really the primary emphasis is Western Europe. In terms of pricing, I think we mentioned this in the last call, but one of the real core strengths that we probably haven't said all that much about is the data analytic foundation that we've got inside of the company. We've got just an amazing platform that we've been overhauling over the last couple of years. That allows us to do a level of personalization, a level of personalized data analytics, and as a result, price optimization at a very, very fine level. This is something that has really fueled the company historically, and it's something that we are constantly working on. We think that it's a large part of the story to date that you've seen in Bumble and Badoo, and it will continue to be a large part of the story moving forward as well.

Great. Thank you.

Thank you.

Thanks for the questions. On the Bumble App 2023 outlook, Anu, could you just talk about your latest thinking around expected contribution of net ads versus ARPU? I think you previously talked about a 450,000 to 500,000 range as well as the cadence of that through the year. And then non-financial related, one of your competitors is raising prices, and they're losing some subscribers as a result. Curious if you view this as an opportunity to take share, or know, maybe if there is evidence already that perhaps you are some of those users are moving over to Bumble? Thank you.

Sure. Thanks for the question. As I mentioned earlier, we are maintaining our full-year revenue growth for the Bumble App at 22% to 25%. This also reflects our expectations for net adds, and we still anticipate adding 450,000 to 500,000 users for the entire year as previously guided. In Q1, we projected 90,000 to 95,000 net adds, and we are pleased to report that we exceeded this with 98,000. For Q2, we expect to add between 120,000 and 130,000, and for Q3, we foresee an increase beyond that. Typically, in Q4, we expect to see a slight decrease compared to Q3, which follows our historical pattern. Overall, this aligns with our previous earnings discussions, and we're very satisfied with the business's performance and the product roadmap we have ahead. Regarding ARPPU, we expect it to be slightly lower than the 2022 average ARPPU. Our main goal remains to maximize the number of payers and enhance user experience for each product we release, understanding that this can influence both payers and ARPPU. Furthermore, for Badoo, we had forecasted a decline of about 50,000 net adds for Q1 and ended with a loss of 47,000. We are optimistic about seeing stability or an increase in net adds for Badoo moving forward. While there is still work to be done, we believe the business is heading in the right direction. That's an update on your first question. I'll pass it to Tariq for further insights.

In regard to the recent price increases from competitors, we believe that users choose to pay for Bumble based on their satisfaction with the app. If competitors become less appealing due to pricing, that could potentially benefit us, although it’s still too soon to determine. What we are confident about is that, as Whitney pointed out, our net favorability, which tracks how many people view Bumble favorably compared to unfavorably, is the highest among major dating apps according to an independent research group in the US. This positions us well to remain a favored platform for those interested in dating apps who are willing to pay. In fact, our Q1 net add figures indicate that our new subscriptions and payer penetration rates have remained strong, showing an increase towards the end of the quarter. We believe there are positive trends in the business.

Your next question comes from Shweta Khajuria.

Thank you for taking my questions. Could you please comment on the demand trends that you're seeing? Your competitor recently mentioned there's some headwind on their à la carte because of macro headwinds. What are you seeing, and specifically in North America versus international markets? And then the second question is when you talk about greater focus on operating efficiencies, could you, Anu, please talk about what exactly you are focused on, what drove the EBITDA upside and where it could be potential efficiency gains to be had when we think about EBITDA and margins? Thanks a lot.

Sure. I'll start with the demand question and turn it over to Anu. We are observing positive top-of-funnel demand across Bumble and Badoo towards the end of the quarter, with Badoo experiencing a notable increase in registrations that continued into April. Bumble has also been strong in terms of registrations. Regarding paying trends, new subscriptions remain robust and payer penetration is solid. Specifically for the Bumble App, there was a modest improvement throughout Q1, which is encouraging. Our renewal rates for existing subscribers, those who have subscribed for multiple months, also remain healthy and showed modest enhancements during Q1 and in April. Overall, we are seeing favorable demand trends. However, at a more segmented level, particularly within our Gen Z demographic, we are encountering some economic challenges that impact first-time renewals. Some individuals may want to subscribe but choose not to after their first month due to financial constraints. We are monitoring this closely and working on strategies to address it. On the consumable side, demand is also very strong, particularly our larger consumable packs, which are performing the best among the offerings. This indicates a different trend compared to what some competitors may be experiencing.

Yes. And in terms of your question about EBITDA, I think, for Q1, I would say the majority of y performance that you saw was really us being very disciplined on both marketing spend as well as in headcount. On the marketing side, we've been compensating of viewing all our campaigns, looking at all these little data returns in every market and trimming budgets based on that. We obviously, based on the topline numbers that you see, haven't seen any loss of efficiency. So all of this is just us getting better and better in getting the returns that we want. We would definitely like to see if we can spend some of the marketing dollars that we saved in Q1 and Q2. That's why we haven't increased full year guidance for EBITDA yet, but it's definitely something that we'll continue to look at on an ongoing basis, but we feel very confident in being able to get to at least 100 basis points of margin expansion that we are guiding to for the full year. In terms of headcount, I'll also mention that over the last few years, we've had an ongoing cadence of continuously reviewing different parts of our organization in terms of how much we are funding each of those groups. We've been pretty judicious over the last few years in terms of how much we've grown through the pandemic and in the last couple of years. So this isn't something that we're just doing for the first time this year. This is definitely something that we've always been very good at doing internally. And I think I mentioned this the last time as well; our teams have been told that the bar for incremental headcount is very high. Certain critical areas are definitely being funded. Areas like, obviously Whitney talked a lot about AI, so augmenting our engineering teams to make sure that we have the right skill set around some of the things that we want to build and develop. We are definitely looking at funding, but otherwise, like I said, the bar for how you're thinking about incremental headcount is pretty high. Again, this is something that we are going to continue to keep a very close eye on because we want to make sure that we're investing in the right things to maximize our top line.

Okay. Thank you, Tariq. Thank you, Anu.

Your next call comes from Lauren Schenk.

Great, thank you. Two, if I can. I think relative to what we know you're running through end of February and an 8-K that you put out, it seems like March accelerated really nicely. Is there anything from a specific product feature, geography, monetization that drove that acceleration or just sort of broad-based improvement? And then secondly, just on the EBITDA margin guide for the second quarter, a little bit, I think, below where the street was expecting. Is that just a shift of marketing from 1Q to 2Q? Anything else to call out there? Thanks.

Yes, I think I'll maybe start with the second question first. Nothing specific to call out on 2Q. I think we've said before, our first half tends to be just seasonally, a higher quarter in terms of marketing spend. Now, this in Q1 as well, and eventually we were able to spend less and still achieve the top end efficiency that we wanted. We are earmarking certain funds for certain campaigns in Q2. But again, like I said, I think our goal would definitely be to try and maximize efficiency wherever we can. It doesn't change the trajectory that we have for the full year. It's just purely a function of timing of how some of our campaigns are landing. In terms of the payer cadence for Q1, I think it's important to remember that the net ad number has a lot of things that can impact that. So, it's not always easy to sort of just draw a correlation between the months. If you look at the year-over-year sort of growth rate, January was slightly lighter than you would have normally expected, but February and March did very well. It was in line with how we had planned our product cadence. It was in line with how we had planned our product cadence. It was in line with what we were planning for in terms of top of the funnel user growth as well. Also the payer optimization work that we had planned for the quarter. So this was definitely something that we were expecting. Obviously, when we guided to the numbers, we were very confident that that's the number that we would end up in, and we came in slightly higher than that. So nothing specific to call out other than what had been sort of planned from a user growth and product perspective.

Okay, great. Thank you so much.

Your next call comes from Benjamin Black.

Hi, thank you for taking our question. This is Ishant Goel for Ben. It would be great to hear your thoughts on the recent developments within App Store fees. Do you sense that App Store fees really could be a 2024 event? Thank you.

Hey, sure. So, we are certainly paying a lot of close attention to this, and both what Apple and Google are doing. As we've said, as we talked about before, we are pleased to be in the user choice billing program at Google as just one example of the efforts that we're taking. I would say at the moment, we are quite positive on the impact on users. We do have increasing evidence as these different programs are rolled out that users do want choice in how they are able to pay for our services. As we offer them more forms of payment, you see people opting for those other forms of payment. That generally speaking is a good thing. So we're very positive on the user experience side and on the payer side, if you will, on that front. In terms of the fees themselves, I would say it's not a clear picture at the moment. We're not anticipating, frankly, any major apps for relief this year. Next year, I think this is all hard to say. The net effect of some of the changes being proposed by Apple and Google could actually be to raise the fees that you have to pay as opposed to lowering the fees. It's a very murky picture and there's a lot of detail that needs to be worked through by all the different platforms.

Thank you very much.

Thank you.

Your next question comes from Justin Patterson.

Great, thank you. Good afternoon. Whitney, I was hoping you could touch a little bit more on just marketing toward Gen Z. It seems like something that many companies have been struggling with. So I would love to hear a little bit more about how you're positioning that potential new product to really attract that demographic more. And perhaps as a follow-up to that, I would love to hear you just elaborate a little bit more about the testing features within Bumble. I know some companies just optimize for revenue growth. I'd be curious to hear about how you're thinking about just the broader user experience within there and making sure that you're not sacrificing the health of the product in order to drive revenue growth? Thank you.

Yes. Hi, thanks so much for the question. So to start with Gen Z, I think it's important to note that a significant driver of our success in these recent quarters has been the steady growth that we're seeing in our Gen Z user base. That's particularly in the US. And so, as you can imagine, this is very exciting as we are successfully acquiring this user base of the future. I mentioned that Bumble app also led other dating apps in terms of MTF scores among US Gen Z in Q4. So that's another proof point that our appeal to this very important market is really resonating. We have recently begun to build products designed to engage our Gen Z users. The fact that we're performing so well with this generation without really optimizing the platform yet for them is a positive. I'll talk about that in a second. I just want to take a second and double-click on our unique understanding of the college audience and how this is not new. This is something we have been so focused on since I started the company in 2014. So we have this scaled program with what we call Honey Ambassadors, and because we have consistently and constantly evolved that and stayed current with that, where we don't age with them necessarily. We're always bringing in the freshmen and the sophomores and the juniors and the seniors along with us. We really invested in this audience and we can really relate to them in a number of ways, so not only from the product side, which will be consisting of things like virtual gifts and optimizing speed dating for them and really leaning into that Gen Z women's experience and the deeper focus of this audience-specific content messaging, but we're really good at marketing to them. We have this unique hook in with the influential college students. This is something competitors can't go and just acquire; this is something we've built over the years. It's a deep ingrained network effect, and so that is really paying off for us, because of those roots that we've planted over the years. One thing I'd like to touch on is this low-tier offering that is going to be paired with the kind of college bundle that we've talked about, which we're pleased with those results with those initiatives to date. But a big priority for this college age group is to really test a range of different features that target this particular audience. As I said earlier, that's virtual gifts, and this could be even new experiences that are very social ways to engage. This could be stickers, photo effects, or other ways to express themselves. That is in its very early stages of testing, and we do not expect to have any material contributions of this in 2023, but we're very excited about the prospect for this given that growing and robust user base. Before I hand it to Tariq, I just want to double-click on user joy. This is something we are obsessed with. I want to reinforce that while we are really good at delivering our numbers and staying really incredibly efficient, we operate for the long term. This is a long-term committed business and without customer joy and satisfaction, that's impossible. That is always front and center at every product roadmap, at every strategy meeting. This is absolutely mission-critical with Gen Z and particularly women. I think you see that through our results. I just want to reinforce that while we're great at pricing and optimizing revenue, it's never at the expense of customer joy, safety, satisfaction. With that, if Tariq would like to add anything, I'll take it to him.

The only thing I would build on top of what Whitney said is, as we look at our experimentation plan as we talk about what we're solving for, of course, at the end of the day, we look at revenue, payers, efficiencies, things like that. But those are all output metrics, right? Those are not actually what our teams suffer per se. What they solve for are the input metrics, and the input metrics get back to what Whitney is talking about. We know that if we are able to better match you and better get you matches on the platform, you're more likely to be retained on the platform until you find the person that you want to be with and then you leave. We know that you're more willing to pay if we are helping to generate high relevance for you and that we're able to do that in a safe and respectful way. So our teams from an experimentation standpoint are really looking at that customer journey at the dynamics of the ecosystem. We kind of know that when we are able to make that ecosystem really work well, it leads to more paying users, more revenue, and more EBITDA for us. So that's essentially the philosophy the teams work with.

Great. Thanks. Two questions. First, could you provide some more color on Compliments, the kind of the usage of the feature and how it's driving monetization and payer conversion? And then the second area on AI and machine learning, is the AI that you use kind of across the safety and the recommendation engines, etcetera, all from kind of internally developed capabilities in-house? And then kind of going forward, would you expect to partner with any of these emerging gen AI companies to drive improvements, kind of either in the apps and/or to drive efficiencies across the business and marketing, software coding, etcetera? Thank you.

Thank you so much. So I'll set the stage on AI and machine learning. It’s very important to note that AI is not some new thing for us at Bumble; our work has been deeply rooted in a lot of machine learning and AI historically. But we are really excited about the way AI can really benefit our business moving forward. So I think, before I get into the in-house or other, I will just talk about how we see this enhancing our business. Really across three main domains. First, I would say starting with better products, using internal tooling or taking this trust and safety and machine learning recommendation engine to the next level by deeper integrating with external large language models and data labeling. The second category is really building faster. We think that there's a huge optimization opportunity and productivity opportunity, which really improves engineering and marketing efficiency by adopting AI-based code generators and automation frameworks. The third category is really new products. This is enhancing the product experience. What I mean by enhancing the product experience that might be adding something new that doesn't exist yet, or it could be an optimization of something that say, someone struggles with on the product journey. So, we see this really as an onboarding to your real-life date opportunity. This could start with struggling to pick the best photos. This could be helping you write your bio or set up your profile with the touch of a button. There's so many opportunities along the way. We're also a business before we turn to Compliments based on women making the first move. This has been such a driver of our success and it continues to be. But we believe we can lean into the optimization of that, make it easier for women, make it safer, faster, and more enjoyable overall. There are tons of opportunities here to really drive performance improvements across the board. And before I take this to Tariq to double down on the integration strategy on AI, I will just touch on Compliments briefly. Compliments, by way of update, was really our first foray into the message before match category. We have continued to expand the Compliments feature, and we are growing adoption and increasing retention. Both things we've been very committed on. So in Q1, our focus was really on growing adoption, and we are seeing promising results. Thus far, nearly 15% of our Bumble monthly active users have sent a Compliment. We're very confident in our ability to grow that penetration over time through things like continuous product design improvements, and strategic placement in high-intensity scenarios, and broader future education, as well as marketing the product outside of the app, which you can expect to see this summer. We've also prioritized ensuring a strong and safe user experience, as we scale this feature and roll it out more broadly. Given this recent rollout, Compliments revenue contribution is fairly modest today, but it is building momentum. We’re very excited about the potential and we expect revenue from Compliments to ramp over the year. Tariq, would you like to add anything on AI?

John, the only thing I would say is that the models we've been using historically are internally built models. They work really well. We've actually benchmarked them against externally available large language models from the usual suspects. In most content areas, they benchmark actually better. It's really a reflection of the fact that it's tuned to our data. At the moment, that tuning beats out the power of the other models. We're experimenting and exploring how we have a best-of-both-worlds type of model where we use our internal capabilities and supplement that in areas that we’re weaker with some of the external models. We're pretty happy with some of the kind of offline experiments we've done on this so far, and I think we'll be doing more in that area before.

Thanks for taking my question. It's about Badoo, which I know is only 20% of your business, but I think we keep waiting for it to stabilize. Revenues from that unit are still down double digits this quarter. What are the signs of stabilization that you're seeing? And when do you think we could see a positive turn in Badoo's revenues?

Thank you for your question. It's important to highlight that we have maintained a strong position and continue to lead in our key markets. Badoo remains a top three dating app in several countries across Europe, Asia, Africa, and Latin America. Since late Q1 and into April, we've observed a return to registration growth for Badoo. We have made good progress in stabilizing revenue, which marks the initial steps toward returning Badoo to growth, as we execute our strategy to achieve these results. There's still work ahead, as Badoo faced significant challenges due to the impacts of COVID and the war in Ukraine. However, we remain confident in Badoo's long-term potential and value proposition. On the product side, Badoo's loyal customers value the instant connection and spontaneity that our product offers, and we are focusing more on that. We believe the improvement in our numbers is due to this strategy and our commitment to listening to our customers. Additionally, we are enhancing our monetization with promotional bundles and new consumables, which makes us optimistic about Badoo's future. Throughout Q1, we've executed several revenue and ecosystem experiments that led to improved revenue trends in key markets. We plan to be active internationally with market expansion in APAC and continue investing in Latin America and Eastern Europe. With that, Anu, would you like to add something?

Yes. In terms of when we expect Badoo to be positive year-over-year based on our guidance, you can see what the goal for 2023 is for the Badoo and other line items to start to stabilize. We are still not expecting that it will be in positive territory this year, but the goal definitely is to get it to be stable and then get to positive. I think the first step towards that is getting sequential net adds to be positive, which a path that we are on for Q2. Like I said earlier, we recognize we still have a little bit more work to do there, but we definitely feel like we're on the right path.

Understood. Thank you.

Thanks, Laura.

There are no further questions at this time. This concludes today's conference call. You may now disconnect.