Earnings Call Transcript - BMBL Q1 2024

Operator, Operator

Hello, and welcome to the Bumble First Quarter 2024 Financial Results Conference Call. My name is Elliot, and I'll be coordinating your call today. I would now like to hand over to Cherryl Valenzuela, VP of Investor Relations. The floor is yours. Please go ahead.

Cherryl Valenzuela, VP of Investor Relations

Thank you for joining us to discuss Bumble's First Quarter 2024 Financial Results. With me today are Lidiane Jones, CEO; 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 statement 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 31, 2023, 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.

Lidiane Jones, CEO

Thank you, Cherryl, and good afternoon, everyone. We have had a very productive start to 2024. Bumble is where women make the first move, and it continues today. As I complete my first 100 days as Bumble CEO, I'm even more energized by Bumble's unique position to help the world create healthy and equitable connections throughout people's lives, focused on women's experiences. That's what Bumble has always been about, and our mission, coupled with our product-led approach to meeting customers where they are, makes Bumble more relevant than ever. We kicked off the year with discipline and speed and delivered solid Q1 performance while also executing on our exciting plans for the Bumble app. We launched the first stage of this journey last week. I've been very impressed with our team's energy and pace of innovation, and there's a lot more to come over the course of the year. I will detail what's new with the Bumble app in a moment. But first, let me recap the financial results. Our first quarter performance was solid across our key metrics. Total revenue in Q1 reached $268 million, up 10% year-over-year, driven by Bumble App revenue of $216 million, which was up 11%. Both Bumble and Badoo App grew paying users year-over-year and sequentially with Bumble App net adds of 42,000 in this quarter. Based on third-party data, Bumble App's worldwide downloads show growth both year-over-year and sequentially in Q1. We also continue to expand our global download share fueled by international markets in Western Europe and Latin America. These results, combined with continued financial discipline, enabled us to deliver a significant improvement in our margin. Adjusted EBITDA in Q1 reached $74 million or 28% of revenue. We also returned $84 million of capital to our shareholders throughout our stock repurchase program. Since joining Bumble, I have prioritized listening to our community, including our Gen Z customers. These conversations confirm a thesis core to Bumble that an overwhelming majority of women view equality as a core priority in relationships. We have also learned that how women define equality is evolving. Women want choice and autonomy. With Gen Z in particular, they want to make more human connections in their lives, whether it's dating or friendship, and they want flexibility in how they make their connections. We believe addressing these needs is how we unlock growth in this category and it validates our long-term view of where we're taking Bumble, including how we think of the role of BFF. All of the feedback we have received from our customers reaffirms that Bumble has a strong foundation in place to deliver on what customers want today. That brings us to our Bumble App relaunch last week, where we showcased the first chapter of our extended vision for Bumble and how we're innovating to make our customers' dating experience even better. Our refreshed brand identity and new product features are designed to support three goals; improve the core experience of our customers, enhance trust and safety, and increase our options for monetization. Let me touch on each. First, we're improving the core user experience, starting with opening moves. We have expanded upon our signature make the first move by introducing choice in how connections are made. Women can choose to make the first move as always. And now they can choose to have a question set that their matches can respond to, creating a new way to engage with connections while retaining control. I want to be clear, women still make the first move at Bumble. They now have additional control over how that happens, and we'll continue to emphasize that with our customers. In addition to opening moves, we launched a suite of new features, an improved profile creation flow to make it easier for customers to get started, an increase in the minimum number of required photos to enhance self-expression, advancements to our For You algorithm to accelerate compatible discoveries, and updated our dating intention badges to help our customers better communicate what relationships they're looking for from casual all the way to serious. We complemented this richer product experience with a global marketing campaign, 'We've changed so you don't have to.' The first phase of this campaign showcases how our product updates deliver a better dating experience while underscoring that Bumble has always and will always stand for women. This robust marketing campaign taps multiple channels and activates Bumble's large college ambassador network and global influencer marketing. Second, we're embracing trust and safety for women in the app. This quarter, we advanced photo verification on Bumble with significant updates to our own developed computer vision model for likeness comparison between someone's verification photo and profile photos. As a result, we have improved automation rates at both the user and the photo level while maintaining precision and reducing our manual moderation costs. It's important to know that as we continue to innovate, trust and safety features will be a big part of future chapters of Bumble's evolution, and it is a key part of prioritizing a healthy ecosystem in our products. Finally, we're expanding monetization with our updated Premium+ subscription tier. We continue to have conviction that our subscription tiers are designed to bring value to our customers by offering them the fastest path to finding their matches. We see Premium+ as a valuable future revenue stream and expect to continue to add additional features and optimize pricing for the subscription tier. Beyond Premium+, we're continuing to run global pricing optimization and expanding further into existing growth markets in Western Europe, Latin America, and Asia. Overall, the Bumble app launch feedback from customers has been tremendously valuable to us. We captured the attention of young users who loved our marketing campaign and are taking time to share their thoughts on what they would like to see us do next. It's clear that customers of all ages want Bumble to be the brand that they trust to understand and meet their needs. Based on early data from last week, we have seen strong improvements in engagement trends, including an increase in chat initiation with almost half of new users adopting opening moves, and most importantly, an increase in users getting matches. This has been an encouraging start. Now turning to our other apps, Badoo delivered positive revenue growth in Q1. We plan to continue building on this momentum with product innovation and targeted marketing campaigns aimed at improving brand awareness, especially among women. Our goal is to showcase Badoo as the app that builds dating confidence enabling its loyal user base to express and be their real selves in a safe and trusted environment. Our team is also focused on unlocking the significant market opportunity beyond dating. We increasingly envision Bumble BFF as an integrated part of how we help our customers build meaningful relationships in love. Given the loneliness epidemic in society, there's significant demand for a safe space online for more genuine human connection, and Bumble has the potential to fulfill that need. We are actively looking at ways to accelerate the roadmap for Bumble BFF and we'll share more in the coming months.

Anuradha Subramanian, CFO

Thank you, Lidiane, and good afternoon, everyone. I'll walk you through our first quarter results and then share more about our outlook for the second quarter and full year 2024. Unless stated otherwise, all comparisons are on a year-over-year basis. Total Bumble Inc. revenue in Q1 increased 10% to $268 million, in line with the high end of our outlook. Total paying users increased 16% to 4 million, and ARPPU for the quarter was $21.84, down 4%. Revenue from Bumble App increased 11% to $216 million, exceeding the high end of our outlook. The revenue growth was driven by growth in paying users, which increased 18% to 2.7 million. On a sequential basis, we added 42,000 paying users, slightly above our expectations. Bumble App's ARPPU declined 6% to $26.34, primarily due to geographic mix shift. We continue to see year-over-year ARPPU improvement within many of our individual markets, including the U.S., driven by pricing optimization. The Badoo App and Other revenue grew 7% to $52 million. Q1 marks four consecutive quarters of year-over-year positive revenue growth for Badoo, an exciting milestone in the turnaround of this brand. As a reminder, we began including contributions from Fruitz in Badoo App and Other KPIs in Q4 2023. Turning now to expenses. Consistent with previous quarters, we've remained diligent in our spending across all areas of the business while continuing to drive revenue growth. Total GAAP costs and expenses were $219 million for the quarter, down 6% year-over-year, and Q1 net earnings were $34 million compared to a loss of $2 million in the year-ago period. The decline in cost was largely driven by a decrease in stock-based compensation expenses related to headcount reduction, partially offset by one-time severance and related charges of $17 million. On a non-GAAP basis, excluding stock-based compensation and other noncash or nonrecurring items, total cost and expenses were $194 million, up 5%. Q1 adjusted EBITDA was $74 million, representing a margin of 28%, exceeding the high end of our outlook. The cost of revenue was $80 million and grew 15%. As a percentage of revenue, the cost of revenue was 30% versus 29% in the year-ago period, in line with our expectations. We expect the cost of revenue to remain stable as a percentage of revenue for the rest of the year. Selling and marketing expenses grew 6% to $63 million. This represents 24% of revenue versus 25% in the year-ago period. Our spending was lower than anticipated due to timing of certain marketing campaigns that moved from Q1 to Q2 to better align with the Bumble App product relaunch. G&A expenses were $28 million or 10% of revenue compared to $32 million or 13% of revenue last year. We continue to drive leverage in this line item as revenues have scaled. Product development expenses were flat year-over-year at $23 million and 9% of revenue. We ended the quarter with $263 million in cash and cash equivalents. During the first quarter, we repurchased $84 million worth of shares, including $50 million repurchased directly from Blackstone. At the end of Q1, we had $59 million remaining in our authorization, and today, we announced an incremental authorization of $150 million, bringing the total buyback authorized to date to $450 million. We remain committed to our buyback program, and we strongly believe that using our capital to buy back shares at current levels remains a very good investment. Now moving on to our outlook. As we look ahead to Q2 and the rest of the year, we are very excited about the first phase of Bumble App's relaunch that we unveiled last week. Our outlook, consistent with the expectations we shared on our prior earnings call, assumes that current trends will continue in Q2 for Bumble App and that the benefits of improved trends from the app relaunch, along with the release of additional features, will reaccelerate growth in the second half of 2024. As a result, for Q2, we expect total revenue between $269 million and $275 million, representing a year-over-year growth rate between 4% to 6%. Adjusted for FX headwinds, this represents a year-over-year growth rate of 6% to 8%. We expect Bumble app revenue to be between $218 million and $222 million, representing a year-over-year growth rate between 5% and 7%. We expect Bumble App sequential net adds of approximately 70,000 to 80,000 in Q2. We estimate adjusted EBITDA will be between $69 million and $73 million, representing a 26% margin at the midpoint of the range. Our expectations for total marketing spend for the year remains unchanged. For the full year 2024, we expect total Bumble Inc. revenue growth rate of 8% to 11%. We expect Bumble App revenue to grow between 9% to 11% year-over-year. We maintain our expectations for full-year Bumble App net adds of approximately 350,000 to 400,000. We note that FX trends have become more unfavorable since our previous outlook, and at current levels, we expect an incremental headwind to revenue of at least 50 basis points. We also maintain our outlook for adjusted EBITDA margin expansion of at least 300 basis points year-over-year. In closing, the work we have done in Q1 to right-size our team, strengthen our leadership bench, and accelerate our pace of innovation provides us with a strong foundation to further leverage our powerful brand. We believe we are taking the right measures to accelerate our growth and capture the large opportunity in the global market for online dating and human connections more broadly. We are confident in our path and ability to drive sustainable, profitable growth and substantial value for our shareholders.

Operator, Operator

Our first question comes from Justin Patterson with KeyBanc.

Miles Jakubiak, Analyst

This is Miles Jakubiak on for Justin. Just first on marketing. It seems like you guys are talking a little bit more about your college strategy around marketing, around the relaunch, and I saw some of your brand campaigns launched over the last few weeks. So just curious around your marketing strategy around the relaunch and how you plan to measure performance against that? And then on pricing optimizations, curious if you've seen any early impacts from that? And if you guys expect that to affect ARPPU this year in any direction?

Lidiane Jones, CEO

Thank you, Miles, for the question. Let me start with the marketing. Last week was a big milestone for our company, and I'm very proud of our team for the Bumble App relaunch. It was an important moment for us to recapture Bumble as a culture-defining brand, and we certainly experienced a very positive response from our customers. We are taking a very broad approach to our marketing strategy, engaging not only in out-of-home digital but also, as you mentioned, with our large ambassador program in colleges, as well as our influencer network. This multichannel approach gives us enough flexibility to reach our very broad customer base of all ages, but certainly allows us to be more relevant for our younger users, and we certainly achieved that last week. We received a lot of different feedback, reactions, press releases, and so much more. So we look at a couple of different metrics from a marketing perspective. We look at top of funnel impressions, sentiment analysis, along with the full funnel transformation, how a customer is going from experiencing our apps to downloads and so forth. We're pleased with the first week since the relaunch. But most importantly, I am incredibly amazed at the passion that customers expressed for our brand during the launch campaign. It is not only a great opportunity for us to enter the conversation, but it also allowed us to see that Gen Z customers are looking for Bumble to be the brand that engages with them. In terms of pricing, we look at pricing broadly as well. We have a very early journey still from a monetization perspective across the company. We feel convicted that our subscription tiers are going to set us up for great growth in the long term. As we talked about in our prepared remarks, Premium+ is our newest subscription tier introduced only a few months ago, and we believe that adding more value differentiation over time will allow us to accelerate future revenue across all of these subscriptions. Last week, we introduced a couple of important capabilities for Premium+ including profile photo analysis and curated matches along with improvements to our For You algorithm. These improvements are aimed at helping our customers get their matches as fast as possible. That clear value proposition is really aimed at helping increase conversion and ARPPU across our tiers.

Andrew Marok, Analyst

On the relaunch, again, you've mentioned that it's a continuous process, and I'm sure there's plenty more interesting in the pipeline. But what about these specific features that you've launched to date made them the ones that you wanted to lead with and create that new brand message around?

Lidiane Jones, CEO

Thank you, Andrew. One important aspect for us is reinvigorating and reaffirming to our customers that Bumble stands for women. Make The First Move has been our signature product experience and remains the signature experience today. Our goal is to evolve with our customers. Based on months of engaging with women and understanding how equality matters for them, not only in terms of their experience, but also what it means for them today, what does it mean to be an empowered woman today? We learned that control and autonomy are key aspects of how women want to feel empowered. So we've expanded making the first move to give women exactly that, more control in how they make the first move, and we have received a lot of positive reactions from our customers because we have helped shape that experience. So this first relaunch was an important first chapter of the evolution that we see in the pace of innovation of the company and the product over the course of this year. But we also introduced a number of other capabilities as well: profile experience improvement, enhanced algorithm for For You, added additional safety capabilities, and increased the minimum number of photos so that customers can self-express more. All of that aims to help our customers be successful in our app. And that’s going to be, as you mentioned, Andrew, just the beginning of a continual process. This year, we want to have some big moments in the market where customers not only get to see the value that we're adding for them in finding connections, but they really understand what differentiates us and set us apart. I'm excited by the engagement we’re seeing. We certainly have seen a few key positive engagements in the first week. First, our customers are engaging in conversations and chat at an increased rate. Half of our new users have adopted opening moves in its first week, which is a great sign. Most importantly, we are really looking to help customers find matches and matches have increased since the relaunch. All of those are positive signs that we are moving in the right direction in supporting our customers, reengaging them, and making dating a joyful experience again.

Andrew Marok, Analyst

Very helpful detail. And maybe if I can squeeze in a quick one on Badoo. Now we're in a year's worth of quarters where Badoo has grown users, but the tone has felt like it's been pretty consistently one of cautious optimism. Is it safe to say that we can finally say we've turned a corner there? And what does success look like for that business over the near and medium term?

Lidiane Jones, CEO

Great question. Badoo has a large and very loyal customer base. The product relaunch and targeted marketing campaigns have been newly aimed at helping users feel confident dating. That message is in product capabilities tied to that mission has resonated with customers. Our focus is to continue to fine-tune the product road map based on customer feedback to really help them find their matches and enjoy the confidence that they're building while they're looking for dating. We're going to continue to learn from Badoo. Badoo is a very international market. The positive thing for us and our company is that we can take learning from Badoo and apply it to Bumble, and vice versa, which allows us to expand our growth in one product and one region very strategically.

Ygal Arounian, Analyst

Lidiane, you hit on this a little bit, but can you elaborate on it? Talk about the first chapter in the Bumble evolution and what the launch of new products coming out over the rest of the year means to you. Also, is there any expectation of a positive impact or lift from the app relaunch in the 2Q guidance, or is it still too early to think about in Q2?

Lidiane Jones, CEO

Great. I'll start. I hope the market can see that the last four months showcase that we are operating at a different pace and speed of innovation. This gives me a lot of confidence about our future for the rest of the year. The other thing is that Bumble has a very strong technology platform and has used AI to innovate on the product and safety for four years. We also have a lot of flexibility in our technology infrastructure, which allows us to accelerate the compute capacity to embrace additional AI capabilities without increasing our costs. This is all to say that we have the right tools to accelerate product innovation. I'm personally excited about what AI, particularly generative AI, will allow us to do for our customers this year. Our focus is on helping customers find healthy and equitable connections throughout their lives with a focus on women's experiences. We are looking at several key areas. First is the profile experience and creation that allows us to really understand our users and help them feel proud and inspired to express themselves. Secondly, we want to regularly understand the dynamics of their intent evolution over time. The last thing I’ll leave you with is that we are attracting exciting senior talent from product and technology from the best companies in the tech industry.

Anuradha Subramanian, CFO

Ygal, specific to your question on Q2, let me just take a second to elaborate on how we thought about guidance. If you think about our Q1 performance, we feel good. We were largely in line with our expectations. International growth has been very strong for us. In the U.S., we did see some slowness in top-of-the-funnel trends that we are seeing continue into Q2. As we think about Q2 guidance, we are assuming these trends will largely continue. Now we are very excited about the relaunch as we've discussed, but it's still early days, and we want to ensure that time is taken to iterate on the product. I think about this as an acceleration in the second half with Q2 being where we watch the work we are doing and make refinements.

Lidiane Jones, CEO

Yes, absolutely. It's a great question. Let's discuss BFF. We have long believed that Bumble can play a more meaningful role in people's lives beyond dating. We have a brand mission and equity in the market that allows us to play a bigger role in different parts of our customers' lives. We've been looking at BFF with an approach very similar to dating, where we're doing one-on-one matches. However, that has narrowed our reach. We're taking a step back to rethink this opportunity, especially with Gen Z customers who have expressed feeling lonely and disconnected. Our goal is to help our customers find groups of people with similar interests that they can meet in real life to make real connections. This new vision is reaffirmed by recent feedback indicating that younger users want Bumble to fulfill that need.

Nathan Feather, Analyst

I'm interested to hear what you saw in the testing about the relaunch that gives you conviction in the back half acceleration. Is this fully predicated on the improvements you're expecting to the app or are there other factors at play?

Anuradha Subramanian, CFO

Sure. As Lidiane mentioned, we're very excited about the relaunch. Early data regarding engagement and adoption of new features have been promising. It's been just a week since we launched, and we're monitoring results closely. There’s a lot more work to come throughout the year, including new features aimed at enhancing user experience, onboarding processes, and adding features to our subscription tiers like Premium+. Our marketing roadmap for the year is built around amplifying product work with strong brand moments. We're seeing trends develop as we expected, encouraging us about our future growth.

Nathan Feather, Analyst

Can you give any more color on your high-level buyback strategy and any cadence that investors should think of as we move through the year and next year?

Anuradha Subramanian, CFO

Absolutely. We feel fortunate to have a strong balance sheet with a lot of free cash flow generated every quarter. Investing in our business is our top priority. Our second priority is looking for inorganic growth through M&A where it aligns with our long-term mission. Finally, our commitment to the buyback program remains strong, as we believe it’s a good use of our cash. We will continue to be opportunistic in our buyback strategy throughout the year.

John Blackledge, Analyst

On the relaunch, do you expect it to act more as a driver for top-of-funnel growth or for payer conversion?

Lidiane Jones, CEO

Our primary job is to help our customers find connections in women’s experiences. We’ve noticed significant increases in engagement and the number of matches since the relaunch. Our core KPIs remain focused on paying users and ARPPU. We’re monitoring engagement metrics closely to ensure we’re ensuring sustainable growth for the future. We're optimistic about the early results from the relaunch and are geared towards collecting user feedback to guide our next steps.

Jian Li, Analyst

I have a follow-up on the M&A opportunities you mentioned. Can you clarify your criteria for pursuing inorganic opportunities?

Lidiane Jones, CEO

Our approach to M&A focuses on delivering seamless experiences for our customers. We evaluate not only business opportunities but also how well that technology aligns with our long-term mission. We regularly assess innovative technology across the market, ensuring they create strong value for our customer base. Our solid financial position enables us to explore promising opportunities.

Benjamin Black, Analyst

I'd like to hear about your strategy to offer women more options around who makes the first move and its impact on app interaction. Additionally, could you help us understand the balance of the year in terms of Bumble App payer net addition trends?

Lidiane Jones, CEO

To be clear, at Bumble, women still make the first move. We have introduced additional options for how they initiate that move. This has received overwhelmingly positive feedback from our users. It has also improved men’s interactions by allowing for more engaging conversations. This evolution is a testament to our commitment to enhancing women's experiences, and so far, early adoption shows promising signs. Regarding payer net additions, for Q2, we are guiding for approximately 70,000 to 80,000. Q3 typically sees seasonal strength, and we expect to see positive effects from the app relaunch then.

Curtis Nagle, Analyst

That was one of them. So I think I'm all good there. But Anu, just a quick modeling question regarding stock-based compensation expectations for the year.

Anuradha Subramanian, CFO

In Q1, we saw an unusual quarter regarding stock-based compensation due to workforce transformation. While we’ll be able to provide better visibility into this once we complete those changes, you should expect our overall stock-based comp levels to be lower than what you've seen historically.

Laura Champine, Analyst

I want to understand the trajectory of revenue growth. It seems there would be a significant step down in growth this current quarter before it bounces back in the back half. Can you clarify what drives that?

Anuradha Subramanian, CFO

As you noted, we are guiding for a lower growth rate in Q2 compared to Q1 due to ongoing trends in the U.S. However, we are optimistic about improvements in the second half as a result of the relaunch and features that enhance user experience and monetization. We believe strong brand moments and product innovation will sustain positive momentum.

Operator, Operator

Ladies and gentlemen, this concludes our Q&A and today's conference call. We'd like to thank you for your participation. You may now disconnect your lines.