Earnings Call Transcript - BMBL Q2 2024

Operator, Operator

Hello, and welcome to the Bumble Second Quarter 2024 Financial Results Conference call. My name is Elliot, and I'll be coordinating your call today. I'll now like to hand over to Cherryl Valenzuela, Vice President of Investor Relations. Please go ahead.

Cherryl Valenzuela, Vice President of Investor Relations

Thank you for joining us to discuss Bumble's second quarter 2024 financial results. With me today are Bumble’s CEO, Lidiane Jones; and CFO, Anu Subramanian. 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 at ir.bumble.com. And with that, I'll turn it over to Lidiane.

Lidiane Jones, CEO

Thank you, Cherryl, and good afternoon, everyone. When I joined Bumble seven months ago, we embarked on a plan to strengthen our foundation to deliver long-term growth and profitability. We added outstanding talent to our team. We established our cost structure, enforced a culture of excellence, and began to reimagine Bumble App's product to ensure we're delivering the best and most relevant customer experience to women today. As the first dating app built with women at the epicenter, we continue to believe that when dating is better for women, it is better for everyone. That is core to Bumble's mission and will remain our priority. In April, we launched the first chapter of Bumble App's evolution, including a refreshed look and feel, improved onboarding and profile creation plans, as well as launching opening moves, which gives women more choice in how conversations start. This launch was just the first step and was successful in achieving two important objectives: delivering a better experience for women and improving engagement. We have seen increases in users with high-quality profiles, more matches for women, and people voting for us across genders. These early wins highlight the type of customer value that drives long-term sustainable growth. This category is vibrant, and we see tremendous opportunities ahead, but it's evident that to reignite the user growth engine for our company in the long term, we need to take a firm stance on delivering customer value that goes beyond this launch. We are making the difficult but important decision to reset our strategy to deliver durable customer value by addressing two fundamental and interconnected challenges. First, we need to ensure we're capturing the right balance and mix of people in our customer ecosystem. This entails correcting demographic imbalances and improving retention by providing our customers with more innovative and compelling dating experiences. Second, we need to monetize more effectively while ensuring a great experience for both our free and paid customers. To address these challenges, we have embarked upon a comprehensive plan that will help us achieve our ultimate goal of making Bumble the number one choice for people to find love, friendship, and community around the world. Our plan is focused on three important areas: ecosystem, customer experience, and our revenue strategy. Let me detail each one of them. Our first area of focus is fostering a vibrant customer ecosystem. Our customers come to our app to meet people, so getting the right mix of intent from people in Bumble is fundamental to our success. Strengthening our ecosystem will result in better engagement, improved retention, and ultimately, deliver more successful outcomes for our customers. Our product choices going forward will increasingly favor ecosystem health and engagement on the Bumble app. An example is prioritizing more robust profiles for all of our users. We know that creating detailed profiles and adding photos takes time and often causes friction, particularly during onboarding. However, we also know that quality profiles facilitate better engagement and greater customer success, particularly for women, which in turn makes the men's experience better. This April launch provided us with evidence of that. By raising the bar on minimum requirements for new user profiles and photos, we drove immediate improvements to engagement metrics caused by a better experience and more engaged users in our ecosystem. While our efforts may turn away some lower engagement users in the near term, we believe this will ultimately result in a more authentic and better experience for our users over time. Achieving customer balance also involves updating our marketing playbook so that we can acquire the right users in each market. In mature markets where our brand recognition is strong, our focus will be on experiential and re-engagement marketing strategies. In tier two and tier three cities, we'll expand our brand and digital marketing campaigns. To better execute these goals, we're investing in marketing technology and data, including better analytics capabilities to effectively personalize how we reach our customers and optimize the ROI of our spend across different markets. Our second area of focus is customer experience, which begins with continuous product innovation. An area I am personally energized by, and I will be more directly engaged with our product and engineering team. We are working on the next chapters of the Bumble App's evolution, and through the fall and early winter, we'll be launching several new features, including more options for making opening moves, new interest filters, improvements to our core matching algorithm, and customization to our chat timer. We will also introduce new AI-driven features, including an AI-assisted photo picker to ease the profile creation process and conversation support that will help our customers gain confidence to be their best selves. We have an ambitious view of how AI will enhance the value we deliver to our customers at each step of the dating journey for profile creation, discovery, engagement, and the core of our matching models. Another essential part of customer experience is safety and support. Bumble has a strong foundation for safety, and we're doubling down on safety innovation. By expanding our efforts to crack down on bad actors, we move duplicate accounts and add government ID verification on Bumble app actions that may have a short-term impact on MAU but will result in better and safer user experiences. We're also optimizing our operations to speed up support and safety resolution while improving the accuracy and quality of service. These initiatives are designed to ensure our customers know that they're part of an ecosystem committed to safety and healthy connection. Our third area of focus is evolving our revenue strategy. We are reevaluating how we deliver value at every step of our customer's journey. From the top of the funnel to peer conversion, while optimizing for LTV. Over time, we'll rebalance Bumble subscription tiers and merchandising in favor of mechanisms that reward positive peer behaviors and support better ecosystem health. As part of this process, we'll slow down certain monetization initiatives in the near term, including the expansion of Premium Plus. Being more deliberate about how we monetize in the near term does not mean that we see fewer growth opportunities. It means we're treating unsustainable short-term growth in favor of better connecting customer experiences with long-term growth potential. We'll also lean on areas of strength and where we see growth opportunities, including Badoo International expansion and adjacent opportunities like advertising. While the initiatives I've outlined have been primarily about enhancing Bumble apps, they extend across our entire portfolio with the goal of building out our offerings to expand our TAM. Badoo has provided us with great proof points of how we orienting towards customer value leads to better outcomes for them. In Q3, we're planning to roll out brand updates and the re-architecture of the revenue strategy for Badoo with new subscription tiers designed to be more affordable and encourage higher engagement. As I shared last quarter, Bumble is the connections company, and we remain excited by the potential to expand into apps for non-romantic relationships. In July, we closed the acquisition of Geneva, a group and community app for people to connect based on shared interests. Geneva will meaningfully accelerate our opportunity in the friendships and community space, and we're working towards launching it more broadly later this fall. We have more to share in the coming quarters. In closing, our renewed and relentless focus on our customers is essential to unlocking further untapped growth in this category. I want to be clear that I do not take lightly the impact our decisions will have on short-term growth, but I have high conviction that this is the right path for Bumble's long-term value creation. I came to Bumble to innovate for our customers and help them find successful connections and relationships through our experiences. While we have a lot of work in front of us, I am energized and confident in our path forward and will keep you informed on our progress along the way. I want to thank the Bumble team for their incredible hard work and dedication, and I want to thank our customers for their trust in us, as well as our partners and investors for their continued support. And with that, let me turn it to Anu.

Anuradha Subramanian, CFO

Thank you, Lidiane, and good afternoon everyone. I'll walk you through our second quarter results and then share more perspective on our updated 2024 outlook. Unless stated otherwise, all comparisons are on a year-over-year basis. Total Bumble Inc. revenue grew 3% in Q2 to $269 million. FX headwinds totaled $3.4 million through our top line this quarter, and impacted our growth rate negatively by approximately 1.5 percentage points. Revenue growth was driven by total paying users, which grew 14% to $4.1 million, offset by an 8% decrease in our average revenue per paying user (ARPPU) to $21.37. Bumble app revenue grew 5% to $218 million, and FX headwinds were approximately $2.5 million, which negatively impacted the growth rate by one percentage point. Q2 growth was driven by a 15% increase in paying users to $2.8 million. On a sequential basis, we reported 87,000 paying user net ads with continuous strength in international markets. The increase in paying users was partially offset by a 9% year-over-year decline in our ARPU, owing to geographic mix shift. Our ARPU continued to grow year over year within many individual markets, including the US. Badoo app and other revenue of $51 million declined 2% year over year. Foreign exchange headwinds were approximately $1 million, negatively affecting growth by about two percentage points. We grew paying users by 12% to $1.3 million, and Q2 net ads were 27,000. Our ARPU declined 7% to $11.93. As a reminder, we began including contributions from Badoo app and other KPIs in Q4 of 2023. Turning now to expenses, we continue to operate with financial discipline, and our second quarter operating expense leverage reflects the cost structure improvements we implemented earlier this year. Total GAAP operating costs and expenses were $217 million for the quarter, down 9% year over year. Q2 net earnings were $38 million compared to $9 million in the year-ago period. The decline in costs was largely driven by a decrease in stock-based compensation expense related to headcount reduction, partially offset by one-time severance and related charges of approximately $3 million. On a non-GAAP basis, excluding stock-based compensation and other non-cash or non-recurring items, total costs and expenses were $194 million, up approximately 1% year-over-year. Q2 adjusted EBITDA was $75 million, representing a margin of 28% and up from 26% last year. Cost of revenue was $80 million and grew 6%. As a percentage of revenue, cost of revenue was 30% versus 29% in the year-ago period. In line with our expectations, selling and marketing expenses grew 5% to $67 million, representing 25% of revenue. Our spending was lower than anticipated, primarily due to lower marketing around our Bumble brand relaunch campaign. G&A expenses declined 9%, to $27 million, or 10% of revenue, compared to $29 million, or 11% of revenue last year. Product development expenses declined 17% to $20 million, representing 7% of revenue. The decline in product development expenses was primarily related to reduced employee costs. As a result of our restructuring actions announced in February. Turning to the balance sheet, we ended the quarter with $287 million in cash and cash equivalents. Since the inception of our repurchase program, we have returned $241 million to shareholders, representing more than 125% of our free cash flow over that time. Year-to-date, our total share repurchase is $84 million, which represents more than 2.5 times our year-to-date free cash flow of $31 million. At the end of Q2, we had $209 million remaining on our $450 million total buyback authorization. Our strong balance sheet and profitability give us the financial flexibility to continue returning cash to our shareholders. We remain very committed to our buyback program and continue to believe that buying back shares remains a very good use of our capital. Now moving on to our outlook for the rest of the year. We are intentionally resetting our outlook today to reflect the execution of the customer-focused strategy that Lidiane just outlined. In the process of strengthening our ecosystem and improving the customer experience, we plan to prioritize product and marketing investments that will improve engagement and ecosystem health, particularly in our more mature market. This will include expanding our efforts around safety and improving the mix and intent of customers on our app. As we align our revenue strategy to deliver broader customer value across all subscription tiers, we will also slow down certain monetization efforts like Premium Plus that we had originally planned for in the second half of the year. All of these factors in aggregate will impact our near-term top of funnel user growth and monetization, but we have high confidence that these are the necessary steps for us to reignite user growth, drive sustainable revenue, and capture customer value in the long term. We continue to be encouraged by the strength we are seeing in many of our international markets and expect healthy growth to continue in those in the second half. As a result, for Q3, we now expect total revenue between $269 million and $275 million, representing a year-over-year decline of 1% at the mid-point. Adjusted for FX headwinds, revenue would be flat year-over-year. We expect Bumble app revenue to be between $217 million and $221 million, also representing a year-over-year decline of 1% at the midpoint. Adjusted for FX, Bumble app revenue will also be flat year-over-year. We expect Bumble app sequential net ads of approximately 40,000 to 50,000 in Q3. We estimate adjusted EBITDA will be between $77 million and $80 million, representing a 29% margin at the midpoint of the range. For full-year 2024, we now expect total Bumble revenue growth between 1% and 2%. We expect Bumble app revenue growth between 1.5% and 2.5% with full-year Bumble app net ads of approximately 275,000 to 285,000. This implies that we expect to see negative net ads in Q4 of this year. While this is partly driven by seasonality, it primarily reflects the actions I just outlined. Owing to our revised revenue growth outlook, we now expect full adjusted EBITDA margin expansion of at least 200 basis points year over year. Our outlook reflects the strong operating profitability of our business model, including the benefit of in-year savings from our workforce reduction. That benefit has largely been realized as of today with a small incremental portion to come in Q3. We will continue to exercise operational and financial discipline and take an ROI-focused approach to how we invest strategically for Bumble's long-term growth in the critical areas that Lidiane outlined earlier. In summary, we see tremendous opportunity for Bumble Inc. We are making intentional choices today to align our strategy, execution, and resources to capture the large long-term opportunity ahead of us. While the actions we are taking are difficult in the near term, we are in a healthy position financially as we execute, including our ability to drive strong cash flow while returning capital to our shareholders.

Operator, Operator

Our first question comes from Andrew Marok with Raymond James. Your line is open. Please go ahead.

Andrew Marok, Analyst

Thanks for taking my question. Maybe one on the Q2 results first and then one on the guidance. So, given that your comments were that ARPPU is growing within many of your individual markets, with the overall ARPPU decline driven largely by the geo mix shift, should we infer from that a decline in U.S. paying users, or can you help us provide any guardrails around the U.S. versus international paying user or MAU dynamic?

Anuradha Subramanian, CFO

This is Anu, I'll take that. Yes, I think as we mentioned on the call, we are seeing, overall, our ARPPU decline for the Bumble app. While individually in each of the markets, including the U.S., we are seeing ARPPU increase, the weightage of the U.S. versus international markets is having an impact on overall ARPPU. We are seeing some pressure on U.S. top-of-the-funnel metrics, and that is flowing through to the pressure that we are seeing on U.S. payers as well. A lot of the actions that we are outlining today are effectively meant to really focus on our more mature markets, especially the U.S.

Andrew Marok, Analyst

And then maybe one on the product roadmap and the context of the guidance. I'm sure the roadmap includes some things that are likely to be more impactful than others in terms of the UX and revenue trajectory. I guess, can you provide any further clarity on maybe timing for some of the more impactful moves, or just a sense of what groundwork needs to be laid in place product-wise before you start to turn on some of the more impactful features? Thank you.

Lidiane Jones, CEO

Thank you, Andrew. As we aligned on this strategy today, we are unveiling a customer-centric strategy to really set us up for reigniting growth in the long term. What this means from a product perspective is that we are really optimizing for engagement, as you've heard from our April launch. We saw that improving the customer experience, especially women's experience, drove engagement, which takes longer to realize itself. And that's the set of principles behind the releases and the features that you heard. Today, we are planning to release a series of capabilities, the expansion of opening moves, expansion of intentions that will allow us to better align the experience of our customers and balance the ecosystem in mature markets as the new just called out. We do believe that these actions will improve the overall experience and retention of our customers, but it'll take multiple quarters for us to start realizing, a top-of-the-funnel strength that we believe these capabilities will offer. We also, as you heard today, are really focused on ensuring the quality of engagement and the intention of engagement of their users are there for all of our major markets. This has meant that what we started in the first chapter of Bumble in April in raising the bar for profile quality is going to expand with our AI photo picker for profiles so that we can make more users look great on our platform and get the same level of engagement that we think will help drive overall growth and success of our metrics. So, the foundation of what we are delivering is great engagement, great profile creation, and increasing the experience bar in safety for women, which will in turn also make the experience great for men. What we'll see is great customer focus from us; that's really what the strategy is about, and we will start aligning our revenue model to that and see the revenue improvement over quarters.

Operator, Operator

We now turn to Cory Carpenter with JP Morgan. Your line is open. Please go ahead.

Cory Carpenter, Analyst

I had two on Bumble App as well. Maybe Lidiane for you, could you talk about just at a high level what you saw with the initial app launch that made you decide now is the right time to make the pivot and reset the roadmap going forward? And then I was just hoping you could expand a bit. You talked about monetization mechanisms that reward positive user behavior, and what do you mean by that and what could that look like? Thank you.

Lidiane Jones, CEO

Great question, Corey. Thank you. So, what we certainly, you know, if we step back a little bit, this strategy isn't just about this past quarter. It is a combination of factors that have weighed on the areas of our plan. If you look at the top-of-the-funnel softness that we've talked about, this has been discussed by Bumble over several quarters. In the last few quarters, we have seen steady pressure in our results. What we saw from our April launch is that the engagement has immediately improved our customer experience, and improved engagement. But it doesn't translate immediately into revenue growth. In the past, sometimes a consumable will drive immediate revenue but doesn't sustain those users. What we are really shifting towards is prioritizing product experiences that are going to drive long-term sustainable revenue growth. We are focused on ensuring that the differentiation of why people choose to come to Bumble, which is women's experience, and the fact that it's a safe, healthy platform for our users is undeniably the best one in the market. A lot of what you're going to see in our product roadmap is very focused on the differentiation, along with helping our customers be successful. People come here to meet great people. We want to create a healthy ecosystem balanced and innovate our products to help our customers stay here and improve the top of the funnel, which is ultimately our goal.

Operator, Operator

We now turn to John Blackledge with TD Cowen. Your line is open. Please go ahead.

John Blackledge, Analyst

Two questions. You mentioned sales and marketing, so maybe some changes there. So, with the reset, should we expect an increase in sales and marketing in the back half of the year as part of the strategy, and perhaps to drive top of funnel? And then the second question, you also mentioned slowing down the Premium Plus rollout. Could you give the rationale for this strategic change?

Lidiane Jones, CEO

Let me start. On the marketing side, as you heard from Anu, we're operating with a lot of discipline. We believe we have the right allocation of dollars. What we are really focused on is how we optimize for LTV, and we are being more tailored about our go-to-market strategies based on the level of maturity of the market. In markets where we have greater penetration, we're focused on attracting users who are already aware of our brand. We are reigniting re-engagement strategies where our strategies for emerging markets are very different, and digital and performance marketing are very effective. So, it's really about optimizing and tailoring our marketing strategy for markets. I think that's going to certainly drive an improvement to the performance of our investments, and that's our focus. In terms of Premium Plus, I want to clarify that we are just maintaining Premium Plus as it is today; we're not changing it. What we are doing is really rebalancing the value of our subscriptions. We believe that before we overinvest in creating additional value for Premium Plus, it is essential to land the free experience as a great one and ensure we have clarity around the value of each subscription tier. That will, in turn, improve the top of the funnel, which helps every metric. It improves in payers, payer conversion, and ARPPU over time. So, it's about rebalancing. We will maintain Premium Plus in the market as it is, and our focus is aligning the subscription tiers and value as we add more product capabilities in the next few quarters.

Anuradha Subramanian, CFO

And John, just to follow up on the sales and marketing question. From a dollar perspective, we feel pretty good about the dollars that we have allocated for the second half. As a percentage of revenue, you'll actually see Q3, I think, we'll spend a little bit less than what we spent in Q2, but in Q4, we do intend to increase marketing as a percentage of spend again. Lidiane's earlier point about ensuring that we have the right strategies in terms of how to go to market is really going to be our focus versus just spending more to get more users.

Operator, Operator

Our next question comes from Ygal Arounian with Citigroup. Your line is open. Please go ahead.

Ygal Arounian, Analyst

I want to go back to the first point of three important areas. You talked about Lidiane, getting the right balance in the customer ecosystem. You guys historically talked about your ecosystem being healthier, leaning more towards women and the focus on the women's experience has made a healthier ecosystem, and it feels like that maybe has changed or something in the way you look at it has changed. That's leading to some of the product enhancements or changes you're making here. Is that the case? Can you just talk about that ecosystem and how it's evolved and where it's at right now?

Lidiane Jones, CEO

Yes, great question. Let me unpack the ecosystem a little bit. Bumble continues to be the best platform for women, and it has been a great source of advantage for us. But as we scale the business now, we are a billion-dollar business in several markets. There has been a slight imbalance that has been created, and it's not just about gender balance—it's about intent balance and the general mix of users and what they are looking for. So, we're taking a more sophisticated look at that mix of users and engagement and intent, because that will allow us to deliver the best possible experience to our users. This certainly is important for mature markets. As you've heard from both Anu and I today, our markets in the U.S. in particular are more mature. We have great brand recognition and brand love, and it really is about tailoring how we're delivering our experiences, how our customers are experiencing our products in their local markets. That's what a big part of our shift is all about. We believe that's really going to reignite the engine of user growth for us, but it'll take some time. It's complex to get that mix right, and we want to do right by our customers.

Ygal Arounian, Analyst

To follow up on that, I guess from last quarter, looking at the magnitude of the change in full-year guidance, is it possible to parse out what the impacts of the user and monetization changes are here—the near-term trade-off versus the expectation of what the app refresh would deliver over the course of the year? So, how much is the new actions, and how much of the app refresh not hitting your expectations? Thanks.

Lidiane Jones, CEO

Yes, I can take that. If you take a step back and break down the guidance in terms of where we were a few months ago versus where we are today, I would say there are two main factors in terms of where we see things having changed. The first is what we are seeing around top-of-the-funnel trends. If you recall in our Q2 call, we mentioned that we were seeing some slowness in our top-of-the-funnel. As we went through Q2 and entered Q3, we are observing those trends continue. We had planned for an improvement in these trends, coming out of the relaunch and from the product and marketing work that we intended to do. So, this wasn't just about what we had planned from a relaunch perspective, but also our product roadmap for the second half of the year. Given the reset and the strategy shared today, a significant part of our second-half roadmap product focus is now much more around ecosystem health and ensuring that the engagement metrics we see are healthy, which will lead to top-of-the-funnel improvements. But, as Lidiane said, it will take some time. That's part of what is built into the reset of the revenue outlook. The second item we had built into our assumptions for acceleration in the second half pertained to monetization from features like Premium Plus that we have now paused in favor of some more fundamental work we are doing around our revenue strategy and architecture. I want to make it very, very clear that we still have strong belief that there is abundant opportunity in terms of payer conversion and monetization ahead of us. If you compare payer penetration rates for us versus where you see where the market is, we are still lower than the rest of the market, but we strongly believe that we need this fundamental re-architecture work to set us up for growth that we know is ahead of us. So, combining both of these factors led us to the second half outlook that we've shared today.

Operator, Operator

Our next question comes from Mark Kelly with Stifel. Your line is open. Please go ahead.

Mark Kelly, Analyst

I wanted to go back to the question Ygal asked, which is about the women-first strategy. And maybe not to put words in his mouth, but perhaps a departure from that in some respects. Given that your main competitor has a bunch of initiatives aimed at women and trying to add different features and functionality for that cohort, how should we think about the future in terms of being able to differentiate yourself versus that competitor or others in the long run? When it seems like some of the apps in the dating category are converging in terms of functionality and messaging? That's my first question. The second one is you mentioned monetization through advertising on the platform. How do you get that balance right between ad load and making sure your users do not churn away to competitors? Thanks very much.

Lidiane Jones, CEO

Thank you, Mark. First, let me start with our strategy. As I said at the start of the earnings call today, Bumble was the first app that really focused on women at the center of our experiences. That continues to be the case today. We are not shifting our strategy because our fundamental belief is that when women have a great dating experience, everybody else does. That's the compass in which we're setting this strategy: we are the best destination for women and we're going to continue to be. What we're really focused on is making sure that not only our product innovation continues to deliver great experiences and safe experiences for women, but also that we are delivering a great experience across the entire ecosystem in turn. The measures that we're discussing today are very much centered around what differentiates us in the market. With regards to advertising, we believe that our approach to advertisement will be anchored on our customer-centric approach to product delivery. We envision select and strategic partnerships that will offer ad space to partners adding value to the dating journey of our customers. We will be very selective, scaling this over time. However, we see significant revenue opportunities while also adding benefits to our customers in terms of their overall dating experience. It's about serving the end user during their journey. There's definitely revenue upside for our customers and our business, and that's what we'll focus on.

Operator, Operator

We now turn to Curtis Nagle with Bank of America Merrill Lynch. Your line is open. Please go ahead.

Curtis Nagle, Analyst

Just one for me. Given the step down in the core business and the restructuring and reacceleration efforts taking longer than expected, does it make sense to pause or perhaps pull back on BFF and on romantic relationships at this point?

Lidiane Jones, CEO

Curt, great question. Our efforts concerning friendship, especially with the acquisition of Geneva, which we closed on July 1, are about being where our customers and consumers are. If you examine user sentiment, especially among younger users regarding the category, their starting point is with community creation first. We view this as a connected experience to the future of dating; it's not separate. It's an interrelated and vital generational dynamic that we want to be at the forefront of. This is the anchor point for tackling community and friendship development as an on-ramp to what becomes how many of our users begin their dating journey. We believe this is an important message and is appropriately sized to allow us to grow gradually. I genuinely believe there are tremendous innovation opportunities we can deliver to the business over the long term in this space.

Operator, Operator

Our next question comes from Nathan Feather with Morgan Stanley. Your line is open. Please go ahead.

Nathan Feather, Analyst

Just digging a little deeper into the revenue deceleration, pulling back from mid-teens in 4Q to closer to flattish in the 3Q guide. Can you help us break down the buckets of this weakness between user growth, retention, and monetization? When it comes to the changes in guidance in the back half, is it primarily just changes you are making on the platform and the shift in strategy? Or is there anything macro or consumer-related that we should be aware of? Thanks.

Anuradha Subramanian, CFO

If you think about the drivers of growth, Nate, we have top-of-the-funnel metrics that include new users as well as reengaged users that become active users on the platform. The third piece of the puzzle is optimizing prices in each of the markets. As you heard from Lidiane, the softness we've observed for a few quarters is on the top-of-the-funnel metrics. Reengaged users continue to be strong for us. The weakness is mostly on new user growth. As I said, again, the pressure is primarily felt in the U.S. and in some of our mature markets. Our newer markets continue to show strong growth, so the decline in new users is what we're seeing as most impactful, resulting in the revenue deceleration you're seeing. Regarding the second question, we are keeping a close eye on the impact of consumer sentiment in the macro environment. We have certainly heard that users, especially younger ones, are more discerning about their spending, keeping a closer eye on their service costs. We have taken that into account in our second-half outlook, but we are monitoring closely as things change.

Operator, Operator

Our next question comes from Shweta Khajuria with Wolfe Research. Your line is open. Please go ahead.

Shweta Khajuria, Analyst

Thank you for taking my question. I've got two. One, what is driving your confidence with this new strategy right now? Are there some tests you've run? You sound confident that this is the right strategy going forward, but what is really driving that confidence? The second question is you've been seeing top-of-the-funnel pressure now for several months, perhaps a few quarters, particularly in the U.S. What, in your opinion, is driving that beyond just product and user experience? Are you seeing more marketing competition? Is there a share shift for any particular reason? In your opinion, what is driving that?

Lidiane Jones, CEO

Let me start with the first part. I'm really confident there is a lot of opportunity in this category. We are in a time where users feel lonelier than ever, and it is our responsibility in this category to support connections overall. Looking at the three parts of our plan shared today; there are multiple factors and data that led to this comprehensive plan regarding the ecosystem. We have tested and initiated some of this work in various markets, helping us separate strategies for ecosystems as I mentioned earlier. Our overall business consists of thousands of ecosystems, so we can observe the dynamics when we maintain the right balance of users in our marketplace. We are applying our learnings to develop a roadmap and plan focused on ecosystem health across all of our markets. The second aspect is our product strategy, which we began earlier this year. A key learning from raising profile creation standards is that we kept away some low-engagement users while driving success in women's engagement, resulting in healthier conversations among users, a factor that drives word-of-mouth. Customer success spurs the engine growth through referrals for this company. That remains core to our product innovation: delivering experiences that help people establish successful connections in an enjoyable manner. We have great data insights and customer evidence to support our approach. Lastly, in revenue, we've begun rebalancing Badoo's revenue strategy about nine months ago, focusing on customer preferences. We're noting exciting dynamics and taking learnings from Badoo that will amplify across Bumble. We have all the necessary elements here, and our top priority is execution, as we believe it will drive growth and set us up for long-term success. Regarding the pressure on top of the funnel, consumer companies notoriously reflect multiple factors. Bumble has always operated in a competitive industrial segment, and that hasn't changed; it's always evolving. We pay attention to competitors. However, we strongly believe that excellent customer experience will reignite the top of the funnel, positioning us as customers' number one choice. The other factors will continuously evolve, and we will always monitor them.

Operator, Operator

Our final question comes from Jian Li with Evercore ISI. Your line is open. Please go ahead.

Jian Li, Analyst

Thanks for taking my question. A couple: First, Lidiane, you mentioned this reset could take a few quarters. As we think about the growth equation exiting this year into next year, what should we monitor as leading indicators of success during this reset? Should we see payer conversion improving, top of funnel, or ARPU recovery? Second, just to dive into Geneva, it is an intriguing acquisition. Could you discuss the opportunities presented there, both in terms of Geneva itself, and its community-building features? Are you considering leveraging this tech stack in your core apps? Any product developments around that would be great.

Lidiane Jones, CEO

On the first point, we monitor various metrics closely, from consideration and top of funnel, all the way down to conversion and the ARPPU strength. You've heard our guidance for the second half of the year. Our goal is to provide updates to investors in the upcoming quarters as we gain more insight into our strategy's progress. Regarding Geneva, you are correct: Geneva has community-based capabilities and healthy user penetration in some core U.S. cities. What's exciting about Geneva's customers is their love for the platform and their desire to engage with local communities. Whether through running clubs or movie enthusiast groups, it's a vibrant environment where people can organize events and connect. This aligns perfectly with our belief that involvement in community patterns trials helps create growth engines in the long run. We plan to unveil an updated Geneva version this fall and scale it across our markets where Bumble Inc has a footprint. It’s an excellent opportunity for us to engage with a broader set of users and significantly enhance our TAM. We want to be grounded in principles of fantastic user experiences, strong women's experiences, and safety. Any acquisition takes time to get right, and our goal is to launch it gradually and learn how to evolve and scale this business over time. Our tech stack at Geneva is scalable, offering technology and capabilities we can leverage across our portfolio. This is a key shift in how we operate; we are now functioning as a customer-centric portfolio company, allowing us to apply best practices across all our apps to accelerate growth for the entire business.

Operator, Operator

Our next question comes from Benjamin Black with Deutsche Bank. Your line is open. Please go ahead.

Benjamin Black, Analyst

Thank you for taking my question. I wanted to follow up on the demographic and imbalance you discussed. Could you provide practical examples of how you plan to resolve that imbalance? One more on the recovery: the guide implies that revenue growth will exit the year on a negative trajectory. How should we think about the recovery curve? Is this a multi-year endeavor, or do you expect to see quicker reversals in KPIs? Thank you.

Anuradha Subramanian, CFO

Let me start with the first part: unpacking ecosystems and the imbalance. As I shared earlier, we're examining that balance in a multifaceted way. Ensuring we have a mix of intent among users from diverse backgrounds and generations is crucial for helping users find the connection they are seeking. We want a broader range of users to provide flexibility in connecting people. Ensuring a mix of engaged, aligned users within our ecosystem is vital. I can provide some techniques regarding this. There are product techniques, marketing techniques, and revenue techniques. In terms of product, as you heard from us today, we raised the standards for profile creation during our April launch. Users must add more photos and provide more information to increase retention and engagement. This kept certain low-engagement users away, but it positively impacted revenue in the long term. For marketing, we have user acquisition strategies that will help bring the right users in. We will tailor our strategies for mature and emerging markets to make the necessary adjustments. Revenue techniques, such as promotions and price settings, can also ensure we attract the right users, layered across these three pillars. We hope to create an ecosystem with the right mix of users who can find great success through our product. Regarding the recovery journey, as I mentioned earlier, what I am most confident about is that we have developed a plan that aggressively and urgently studies every part of our business—from customer makeup to our innovations and revenue. We realize that this plan will take time, favoring sustainable revenues. We hope to provide further insights in the coming quarters, but do not have a specific timeline today.

Operator, Operator

Our next question comes from Ken Gawrelski with Wells Fargo. Your line is open. Please go ahead.

Ken Gawrelski, Analyst

Just a couple, please. First, could you discuss the significant restructure you did earlier this year? Has that put you in a more difficult position as you think about it, given the reset on strategy and reinvestment phase? Or do you find the investments needed differ with a different type of staff and skillset? That's my first question. The second question is broader; public markets tend to favor transition stories with uncertain time frames. I know you've answered this in various ways, but how should we think about the time frames in evaluating the success of this transition? Can you provide any public milestones? I know you shared second-half guidance, but anything qualitative you can provide?

Lidiane Jones, CEO

Thank you for the question. On the restructuring part, as you know, in the first half of the year, we restructured about 30% of our workforce, focusing on agility and optimal organization to execute as a company. I feel very positive about where we are positioned. We currently do not have additional restructuring plans. We are well set up and have the right talent necessary to execute effectively. That was a necessary set of actions to ensure we could execute our strategy, and I believe we are prepared for success. Regarding timelines, while I do not have a specific timeline today to share, I will say we will be evaluating key areas. The balance of the ecosystem will be a key internal metric to monitor, with numerous detailed submetrics feeding into that. Based on our test results, different windows of time are needed to create a balanced market. In the coming quarters, we will focus on the velocity and effectiveness of the metrics we've previously discussed. Additionally, we have critical product deliverables set for fall through winter, and we will monitor engagement and retention closely, as they will help us gauge how well users engage and monetize. Lastly, in our revenue architecture, we will be examining the balance of revenue value creation and extraction, with our goal being to provide experiences that are monetizable while determining how quickly we can realize revenue.

Operator, Operator

Ladies and gentlemen, that's all the time we have for our Q&A. Thank you for participating in today's Bumble Second Quarter 2024 Financial Results. You may now disconnect your lines.