Bumble Inc.

Good afternoon, ladies and gentlemen, and welcome to the Bumble Inc. 4th Quarter 2022 Financial Results Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press star zero for the operator. This call is being recorded on Wednesday, February 22, 2023. I would now like to turn the conference over to Cheryl Valenzuela, VP of Investor Relations.

Please go ahead. Thank you for joining us to discuss Bumble's fourth quarter and full year 2022 financial results. With me today are Whitney Wolf-Herd, founder and CEO, Tarek Shawkat, 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, 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 filing with the SEC, including our annual report on Form 10-K, where the year ended December 31, 2021, and our subsequent periodic filings. During the call, we also referred 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, Cheryl, and thank you all for joining us today. Q4 was a strong finish to the year with total revenue of $242 million and adjusted EBITDA of $60 million, both exceeding our outlook. In 2022, we continued to execute against our strategic priorities, advanced our mission, and delivered strong revenue growth and profitability for our shareholders. Bumble Ink's revenue for the full year reached $904 million, up 19% year-over-year, with Bumble app revenue growing 31%, driven by a year-over-year increase of over 500,000 paying users. We also drove strong profitability, delivering full-year adjusted EBITDA margin of 25% and free cash flow of $117 million. These results are a testament around the globe who continue to execute incredibly well amidst geopolitical and macroeconomic uncertainty. These results also demonstrate the enduring power of our mission to create a world in which all relationships are healthy and equitable to find connections. Now let me touch briefly on each of our brands. Bumble app had a strong fourth quarter with revenue of $191 million, up 28% year over year. This strength was broad-based with strong revenue growth in both our established markets as well as in growing markets such as Germany, Spain, France, and India. Bumble added over 130,000 paying users in the quarter. Based on third-party data sources in Q4, we continued to grow download share in key markets like the U.S. and Canada and maintained our position as the number two most downloaded dating app in these markets. We are also excited to say that As of Valentine's Day, Bumble app is the most downloaded dating app in our top markets, including the US, Canada, Australia, the UK, and Germany. Bumble app's net promoter scores in the US during the fourth quarter led other online dating apps, especially in two of our most important audiences, women and Gen Z. Our 2023 plans extend the momentum we've generated over the last several years. These are built on four pillars. One, continuing our rapid global expansion. Two, reinforcing our brand and product strength, especially with women. Three, growing revenue through new monetization experiences. And four, remaining a leader in safety by design. Let me describe each in turn. First, global expansion has been core to Bumble's growth in recent years, and we believe there's still tremendous runway in both existing and new markets. Building depth and expanding into secondary cities are critical components for our growth strategy. For example, we've been in Germany for a couple of years now, and it continues to grow rapidly as we push into more cities beyond the original launch markets and is now on track to be our third largest revenue market in 2023. We will also be launching in new countries this year. One advantage we have in most markets around the world is a strong baseline level of demand due to the resonance of our brand and our women-first approach. We'll be building on this foundation with active go-to-market efforts to further our expansion in Western and Central Europe, for example, in Italy, Portugal, and Poland, as well as major Latin American and Southeast Asian countries. Second, Bumble is where it is today because of our brand strength and loyalty especially with women, and this remains our priority. We listen intently to our women customers, and we've been steadily launching new features that are most requested by them, including our Astrology Tuesday offering last year, and this year we expect to launch a series of enhancements to the Beeline, the Matching Experience, and roll out new women-focused offerings. We are further investing in our college programs to continue our share gain with Gen Z women. As we mentioned last quarter, we recently launched a dedicated customer experience for users who are verified college students. We have seen several hundred thousand college students verified on our platform and we believe the dedicated experience is resonating. We are also using this verification program to improve targeting of our college bundles and recently launched virtual gifts to this group. Our early tests suggest that virtual gifts lead to almost 20% higher reciprocation rates, especially with Gen Z, and we are optimistic about the future of this initiative. Machine learning and data science have been strong enablers of Bumble's customer experience and growth. We see more and more opportunities to integrate AI further into our user journey, ranging from helping them better optimize their profile and initiate chats to improving relevance and matching. Over the last two years, we have been working on rebuilding our recommendation engine with machine learning at the core. We've tested this new model in several markets in Western Europe over the last six months and saw a substantial improvement in voting behavior and double-digit improvements in match rates. In Q2, we expect to leverage this model to begin testing our new paid Best Bees offering, highlighting highly curated, highly compatible people to you. This brings me to our third pillar, creating new experiences to grow revenue. Over the last year, we've been performing foundational engineering work to build more modularity and agility into our monetization platform. This work was required to enable us to launch our next wave of monetization. Going forward, this enhanced platform will enable the ability to launch new subscription offerings. additional bundles, and a greater variety of a la carte offerings. It will also enable us to target these offerings in an increasingly precise manner to grow customer lifetime value. We will also use this sophisticated platform to accelerate our highly impactful pricing and promotional optimization initiatives. One feature the new platform has enabled is our message before match feature, compliments, which is now fully rolled out with monetization in our major markets. We've seen strong initial user response in markets where we've launched, where we have seen compliments be 70% more likely to result in a match than a typical guest vote. We are now starting to roll out the corresponding marketing plans. Compliments is our first major feature in the Message Before Match space, and we are excited to build upon this with new offerings throughout the rest of the year. In addition to compliments and Best Bees offerings, I'm also excited about the potential for our speed dating experience. In Q4, we transitioned from a branded partnership version of speed dating and launched it as a standalone, unbranded experience in a number of our major markets, including the US, Germany, and India. We are actively testing monetization approaches, including making the experience a ticketed event. Lastly, we know that many of our users, particularly those in their 20s, are looking for more ways to express themselves and their personality with a high level of authenticity. In Q2 and Q3, we will be experimenting with a range of new paid experiences, leaning into this desire for self-expression. This will include expanding our virtual gift offering, as well as creating the ability to add stickers, mood boards, and photo effects to their profiles and chats, just to name a few examples. Our last pillar is safety by design and mission by design. Safety is not an afterthought or a marketing campaign for us. We remain fiercely committed to our mission, and we are working relentlessly to create kind connections. Our approach at Bumble has always been to build safety into our products at the outset and to continue to build new safety capabilities as we see these products in the field. We are also deploying an increasing amount of machine learning into our safety efforts. Our in-house content and photo moderation models continuously monitor our experience to prevent harassment and toxicity, and we are experimenting with GPT-3 and other large language model services to further augment our already strong approach. Now, turning to Bumble BFF, we remain the only scale dating app to have a successful friend-finding offering due to our strong and unique brand. We believe the market opportunity around online friendship is sizable, given the prevalence of loneliness, with the U.S. Surgeon General sharing a 2018 to 2020 survey that revealed 60% of Americans struggle with loneliness. That figure climbs to 75% among younger people. To reflect this significant opportunity, we're increasingly managing Bumble BFF as a separate brand. We continue to be excited by the user traction on BFF. with MAU growth of 26% year-over-year in Q4, alongside strong global appeal. We have a very important set of product and marketing initiatives we expect to launch around mid-year, which we believe will unlock further user growth and look forward to sharing these with future quarters. In summary, we have a lot of exciting initiatives planned for Bumble app in 2023, and we are off to a strong start to the year. Now turning to Badoo. We made solid progress in stabilizing Bidoo back in half of 2022. Despite facing some macroeconomic challenges, Bidoo continues to have a large user base and was ranked among the top three dating apps by downloads in 48 countries, including Brazil, Italy, Mexico, Spain, and France. Bidoo and other revenue also grew year over year when adjusted for FX and the impact of the conflict in Ukraine. We focused recent product efforts on amplifying what Bidoo's loyal and long-tenured user base appreciates most about the platform, how it creates quick and easy, authentic connections, which has had a positive impact on user engagement and retention. The monetization platform enhancements that I mentioned earlier also apply to Bidoo, illustrating the power of our shared platform model. A lot of our focus in 2023 is on continued optimization of our experience using these platform enhancements. For example, we now have a much greater ability on Bidu to offer promotional bundles and new consumables, and we'll be focusing on these to drive increasing payer penetration. In addition, we have a number of exciting new product features launching, all designed to lean into the chat-based experience on Bidu and drive faster time to quality connection. While we still have work to do to fully stabilize Bidu, we believe that we are on the right path. Lastly, I'd like to share an update on Fruits as we celebrate the one-year anniversary of its acquisition. Over the past year, its revenue contribution has steadily grown, and its integration with our shared platform has proceeded smoothly. In French-speaking markets, where its organic growth has been most concentrated, Fruits enjoys strong download share and Gen Z brand identity. I have never been more excited about the tremendous opportunity for our brands, our business, and our mission. We have solid user momentum, and our apps have significant runway for growth. We also have a strong product roadmap and the team to advance it. We continue to be true to our mission of providing safe and kind connections by design. And as always, we will operate with financial discipline and a focus on execution. Thank you to Team Bumble. Thank you for everyone's hard work. We succeeded only because of your dedication and contributions. I'd like to thank our customers, partners, and investors for the continued trust and support. And with that, I will turn it over to Anu for a discussion of our financial results and outlook.

Thank you, Whitney, and good afternoon, everyone. I'll begin with the discussion of our fourth quarter and full year 2022 results before turning to our outlook for Q1 and full year 2023. Understated otherwise, the comparisons I will make refer to the fourth quarter of 2022 versus the fourth quarter of 2021. Total Bumble Inc. revenue in Q4 was $242 million, above the high end of our guidance and up 17% year-over-year, driven primarily by growth in Bumble apps. FX was a $13 million headwind to top line, $3 million better than we had expected at the time of our guidance. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rates negatively by 8 percentage points. At a group level, revenue growth was driven primarily by growth in paying users, which increased 14% to 3.4 million, while average revenue per paying user increased by 1%. Revenue from Bumble app was 191 million, up 28%. FX was a 7 million year-over-year headwind, which negatively impacted growth by 5 percentage points. The headwind from FX was $2 million lower than we had previously anticipated. Bumble app revenue growth was driven by a strong 35% increase in paying users to $2.2 million, and on a sequential basis, we added 133,000 paying users. The strong growth in paying users was driven by a number of factors, including strong registration and re-engagement rates, successful international expansion, and product improvements that drove payer penetration. Bumble Apps are people with $28.64 down 6% year-over-year and 1% sequentially, primarily due to country mix and FX impact partially offset by pricing optimization initiatives. Now moving on to Badoo App and Other. Badoo App and Other revenue was $51 million in Q4, representing a 12% year-over-year decline on a reported basis. In aggregates, FX headwinds and the Ukraine conflict impacted our growth rate negatively by 17 percentage points. Badoo app and other paying users declined 11% year-over-year to $1.2 million. The impact of our exit from Russia and Belarus was roughly a 12% negative impact to growth. Badoo app and other RP pool declined 6% year-over-year to $12.48, primarily due to FX and country mix, partially offset by ongoing pricing optimization work. As a reminder, we currently include fruits revenue within Badoo app and other revenue, but exclude fruits paying users from Badoo app and other paying users. Turning now to expenses. We remain very focused on managing our business profitably, taking into consideration the dynamic macro environment. Total gap operating costs and expenses were $389 million for the quarter. On a non-GAAP basis, excluding stock-based comp and other non-cash or one-time items, our total non-GAAP operating expenses were $182 million, up 19%. Cost of revenue was $67 million and grew 26% year over year. The increase was primarily driven by higher app store fees, resulting from revenue growth and mixed shift between iOS and Android. As a percentage of revenue, cost of revenue was 28%, versus 26% in the year-ago period. Sales and marketing expenses grew 14% year-over-year to $65 million. This represents 27% of revenue versus 28% in the year-ago period as we focused on efficiency in marketing spend during the quarter. G&A expenses were $34 million or 14% of revenue compared to $28 million or 14% of revenue last year. Product development expenses were $16 million or 7% of revenue versus $14 million or 7% in the year-ago period. Q4 GAAP net loss was $159 million compared to a net loss of $14 million in the year-ago period. This included an impairment charge of $141 million related to Badoo brand as a result of loss of expected revenue resulting from our business decision to seize operations in Russia and Belarus. as well as the larger macro environment. Q4 adjusted EBITDA was $60 million, up 10% year-over-year, and represented a 25% adjusted EBITDA margin. For full year 2022, total Bumble Inc. revenue grew 19% year-over-year to $904 million. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rates negatively by 8 percentage points. Revenue from Bumble apps grew 31% to $694 million, driven by paying user growth of 34% to 2 million, leading to more than half a million net ads during the year. FX headwinds impacted our growth rate negatively by 4 percentage points. Adjusted EBITDA was $227 million, representing 25% margin. Our gap net loss for the full year 2022 was $114 million, compared to net earnings of $282 million in 2021. We continue to generate healthy cash flow with free cash flow of $117 million for the year. We end the year in a strong cash position with total cash and cash equivalents totaling $403 million up from $369 million last year. Now moving on to our 2023 financial outlooks. As Whitney noted, we expect another period of strong, profitable growth the year ahead. For full year 2023, we estimate total Bumble Inc. revenue to grow between 16% to 19% year over year. We expect Bumble app to have another strong year. Based on the momentum we are seeing so far, our geo-expansion plans, as well as the exciting product roadmap we have, we expect revenue growth rate between 22% and 25%. While we believe that Bidu and other revenue is on a path to recovery, our outlook assumes continued macroeconomic pressures on the Bidu user, along with ongoing pressures on advertising revenue. We estimate adjusted EBITDA margin will be 26%, representing 100 basis points of year-over-year margin expansion. For Q1, we expect the following. Total revenue between 238 million and 243 million, representing a growth rate of 15% year-over-year at the midpoint of our range. Our outlook assumes approximately 10 million of year-over-year headwinds related to FX and the conflict in Ukraine, primarily in Bidu. Excluding the impact of this, our total revenue growth outlook would have been 19% at the midpoint. We expect Bumble app revenue to be between 190 million and 193 million, representing a growth rate of 24% year-over-year at the midpoint. Excluding FX headwinds, our guidance for Bumble revenue growth rate would be 27%. We estimate adjusted EBITDA will be between 53 million and 56 million, representing 23% margin at the midpoint of the range. Q1 margins reflect the typical high level of marketing spend we see at the beginning of the year. We remain hyper-focused and efficient around spending and have put in place several measures internally to ensure that we stay disciplined around our investment priorities. We are very confident in our ability to achieve our fully adjusted EBITDA margin target of 26% and also remain committed to healthy long-term margin expansion. In closing, our focus this year is on strong and disciplined execution against our strategic priorities. We believe we have an exciting opportunity ahead of us, and we are very confident that we can deliver strong revenue growth and profitability for our shareholders. And with that, operator, we can open it up for Q&A.

Thank you, ladies and gentlemen. We will now begin the question and answer session. Should you have a question, please press star followed by the one on your touchtone phone. You will hear a three-tone prompt acknowledging your request and your questions will be pulled in the order they are received. Should you wish to decline from the pulling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment please for your first question. Your first question comes from Justin Patterson with KeyBank. Please go ahead.

Great. Thank you very much and good afternoon. I wanted to just go a little deeper into some of the assumptions on guidance for the year. Whitney, you outlined a lot of product initiatives and geographic expansion. It sounds like it rolls out over the course of the year. Anu, could you kind of talk about how you embedded the impacts of that into the forecast and, you know, just getting a better sense of what's in the forecast and what could potentially be a surprise over the course of the year? Thank you.

Yeah. Hey, Justin. Happy to take that. This is Anu. So, as I said in my prepared remarks, For Bumble app, we have given a total revenue guidance range of 22% to 25%. We think this will, from a quarterly cadence perspective, be fairly stable. Every quarter, we're not expecting any big peak quarters. Obviously, we're starting Q1 off with good momentum, so we feel good about that, and then we feel good about what's assumed for the rest of the year. Similar to 22, we think the revenue growth comes from a healthy growth in paying users. So we are estimating net ads next year will be around the 450, 500 mark. That's what we are projecting. And that would effectively imply that our people is largely flat to 22 numbers, maybe slightly lower, again, depending on you know, where some of our product initiatives land. Now, as a reminder, and, you know, we've always said this in the past, we are always focused on maximizing revenue versus just maximizing payers or our people. So, again, depending on how some of these product initiatives land, you know, these numbers can shift a little bit up or down. But, you know, we feel pretty good about the net ads numbers. We feel very confident about the revenue range that we've given you. In terms of initiatives, a lot of the revenue improvement that you see next year largely comes from growth in our user base, as well as a lot of the optimization work that we are doing from a product perspective, as well as from a pricing perspective. Again, this is something that we are very, very good at doing. We've done historically, so we feel very, very good about the assumptions that we've made there. With respect to the product roadmap and new product initiatives that we have, like always, you know, we model out what we think a lot of these product initiatives will look like through the course of the year. There are some products like complements that Whitney talked about that are, you know, have already landed in the market. We have real data coming from different markets. So we've made assumptions based on that and complements will be a sizable contributor to revenue in 2023. But then there are certain other product initiatives, you know, later in the year where, you know, we haven't yet landed those. So we've made some modest contribution assumptions. And then there are, you know, certain other product initiatives that we've not even included in our guidance ranges because, again, those are too far down. So, you know, that's roughly how the Bumble app guidance sort of falls out.

That's very helpful. Thank you.

Your next question comes from Shweta Kajuria. Please go ahead.

Okay, thank you for taking my questions. Could you please talk about the share gains that you were implying as of Valentine's Day on your app downloads? The question is, what drove that? Was there a marketing effort that you had in Q1 specifically, and how sustainable do you think Are these share gains that you're seeing across different countries? And then the second question is, Anu, could you talk about your confidence in margin expansion? You sound confident in delivering at least 100 BIPs of margin expansion. Help us think through your marketing efforts for the year. Thank you.

Thanks, Retta. It's Tarek. I'll start with the share gain question and then turn it over to Anu. So we've been... As you noted and as Whitney noted, I'm very pleased to see the traction that we've had on downloads both in Q4 where we continue to gain share and then in Q1 where we've seen a nice acceleration. To cut to the chase, we have not been spending to achieve that acceleration. There's not an outsized marketing spend that is anything out of the ordinary that has helped us achieve that. We think really what's going on is a couple of different things. is we think continuing to build momentum around the value proposition, the narrative around Bumble app, the success stories, and really fostering the word of mouth. We think that a lot of the programs, like it started on Bumble, which we've talked about before, are really starting to have a cumulative effect. That's number one. Number two is there's a lot of work that our teams are doing around... kind of harvesting demand that's already out there. So think about the app stores and how you are capturing the demand that sits on the app store, what's called app store optimization, things like that. There's a parallel in the search engine world as well. We think that we've just continued to get better and better at that demand capture of demand, whether that's Bumble-specific demand or whether that is industry demand. And then that's paying off. And then we were fortunate in particularly in February, late January, to receive a lot of just very nice placement and promotions. We announced a partnership with Netflix as an example. That resulted in a lot of activity in the Play Store and in the App Store itself, things like that. So it's not spend-based where we're buying the traffic, but I think it's a culmination of a lot of the investments that we have been making. And so... You know, you can spend, we don't, but people can spend to achieve market share gains. I think that it's particularly the download share. So we're happy with where we are today. We are happier just with the underlying trend that we have, and we're going to keep focusing on that as opposed to who's number one and two.

Yeah, and Shweta, to your question about margins, you know, like I said, you know, I'm very, very confident about our ability to get to the 100 basis points margin expansion. You know, and I said this in our last earnings call as well, you know, as far as marketing spend goes, which again is, you know, one of our bigger line items, you know, on 2023 we have a very high bar for how we think about marketing spend. You know, growing market share, as Tariq was just talking about, expanding into international markets, all of those are still big priorities for us. So we will definitely be spending money on building our brand. But, you know, we are taking a very hard look at every area of spend, even in, you know, new markets as well as existing markets, to make sure that, you know, all of those areas of spend are meeting the high thresholds that we have set for ROI, returns, et cetera, et cetera. So you will definitely see that line item increase. give leverage through the course of the year. Now, as I said, Q1 always has elevated spends of marketing as you think about, you know, date Sunday and Valentine's Day, so we do tend to spend higher in Q1. It was very similar to what we did last year as well. Our Q1 margin was our lowest quarter in the entire year, and then our EBITDA margin takes up quite significantly as the year goes by. So I wouldn't, you know, read too much into the Q1 EBITDA guide. You know, again, a lot of the spend that we have during the year is very much in our control. So we feel very, very confident about it. You know, the next big area of spend for us is, again, headcount. As we've said, again, previously, we are leading into areas of the business that are very critical to our growth. So you heard Whitney talk a lot about AI and machine learning and data engineering. So those are definitely areas that we want to continue to invest in as far as people and headcount resources are concerned. But we have a high bar for spend in other areas. So that's why, again, you know, I feel very good about the target that we've set forth. And, you know, you'll see us continue to sort of reiterate that message as we go through the year.

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

Thanks, Raja. Your next question comes from Corey Carpenter with JP Morgan. Please go ahead.

Great. Thanks for the questions. I wanted to come back to the Best Bees offering that you teased a little earlier. Could you expand on that a bit? Is that something that would be in perhaps like a new premium subscription package, it sounded like, or more of an a la carte offering? And then secondly, just on macro, you previously talked about a step down in late September, early October. How has that trended since then? in terms of impact on renewal rates and consumables. Thank you.

Hey, Corey. It's Whitney. So we're really excited about Best Bees. This is a paid offering. And I'll just give you a little background on how the feature works, and then we can talk about how we're testing it from a monetization standpoint. So this is really a very exciting opportunity for all of our members to get access to a highly curated and really compatible set of people. So this is why we're calling it Best Bees. And so this is really going to be tailored to that specific user. And we think it's going to be really resonant across the board, geographies, genders, age groups, et cetera. And with the machine learning, there's this huge opportunity to provide more content-based nudges. And so anyway, all to say we're very excited about this. How this will work, it is going to be a premium offering for We are going to be testing both, you know, different versions of that consumable subscription, and we will provide more updates with the rollout of that. Oh, the next question on macro. So, I think it's very important to note that we're feeling very confident about the dating industry, and about our results, the top of the funnel and engagement metrics continue to be strong. So overall, we're growing our paying users at a healthy clip, new subscriptions remain strong, and we're seeing good growth in consumable purchases. Where we did see some macro-related impact last summer was really around the subscription renewal rates for the more price-sensitive user groups. This was really Gen Z. But renewal rates have been stabilized at that lower level, and we've not seen further deterioration since last earnings. And we believe the strength of the business reflects the resonance of the brand, the resiliency of, you know, the majority of our Bumble user base and a lot of our recent product pricing and marketing efforts.

Great. Thank you.

Your next question comes from Alexandra Steiger with Goldman Sachs. Please go ahead.

Thank you so much for taking my questions. Whitney, you discussed virtual gifts as part of the college bundle. How do you think about the monetization potential of virtual goods as a stand-alone product? Also, thanks for providing an update on BFF. How should we think about potential monetization avenues and the timing of that?

Thank you. I'll take BFF and then Tarek is going to jump in. I just want to reiterate that BFF remains an important priority for us in 2023. And the market opportunity with platonic friendships, we feel is going to be equally as important as finding love. So I just want to reiterate this post-pandemic loneliness has become even a bigger concern. So I want to just reiterate that this is a high priority for us. As far as monetization grows, goes. We are not factoring this into our guide for 2023, but we are really excited to be testing some product initiatives around monetization as far as models go later in the year. So we'll update you as the time comes. And Tarek, you can jump in.

Yeah. On virtual gifts, we just launched virtual gifts to that college population that Whitney talked about, and we're seeing a very nice reception from that group, high conversion rates when we are presenting the opportunity. So we do think that we're onto something here with virtual gifts. We are, in fact, also seeing a much higher reciprocation rate, meaning if you send a virtual gift, you're much more likely to get a response. And so it's adding to the overall health of the ecosystem and the value that we're creating for our users inside of the app. So we do think that there is something here. We're excited about what we're doing on the college side. And I think our basic premise on virtual goods is we know that there is a very strong Gen Z opportunity here. We're really looking at how we can put together a bundle, a package of offerings for Gen Z that really leans into this notion of express yourself and self-expression. And so a virtual gift helps you stand out in a different way than you would otherwise. There are other things that we can do to let people express themselves authentically. So you should expect to see us roll this into other packages and bundles targeting Gen Z in particular.

Very helpful. Thank you.

Your next question comes from David Malinowski with Bank of America. Please go ahead.

Hey, it's David on for Nat Schindler. Thanks for taking the question. Is it just possible to dive a little bit more into Bidu's improvement in the back half of the year and maybe just look at what a steady state might look like for the first half of 2023 or beyond that? Thank you.

Yeah, so Bidu, I think it's important to reinforce, and hi, thank you for the question. Bidu remains a leader in its key markets. So It is a top three app by downloads in dozens of countries across Latin America, Central and Eastern Europe, and Asia. And it does have this long, tenured, and loyal global base. So we are continuing to operate from a user standpoint with a lot of strength. On the revenue side, we made solid progress in stabilizing Bidu in the second half of 22. However, we do acknowledge that there's more work to be done to resume Bidu's growth trajectory. And we know that the Bidu customer base continues to be sensitive to inflation and macroeconomic pressures, this really results in overall lower propensity to pay. So our goal is to meet our Bidu customer where they are. So in 2023, we're going to tap our enhanced monetization platform to offer promotional bundles and new consumables to better serve these customers with their price point ability.

Yeah, and just to add, you know, I think from what we are building into our outlook for the year, we do expect that Badoo net ads will continue to be negative in 2023. We definitely think that, you know, X impact from Russia, Belarus, et cetera, the net, you know, negative that we saw in 2022 will, and versus what we will see in 2023 will be better. So 2023 should definitely get better. But overall, you know, we still think it'll have negative net ads. Q1 is probably going to be the most negative. So right now we are projecting about negative $50,000 for Bidu in terms of paying users between Q4-22 and Q1-23. But as the year goes by, we should definitely start to see that recover. And we are doing a lot of work from a product perspective, as Whitney said, from a pricing and promotional perspective to make sure that you know, the path that we have put Purdue on continues to deliver well.

All right. Thank you.

Your next question comes from John Blackledge with Cowan. Please go ahead.

A great thing. So two questions. First on the international expansion, just if you can provide some more color on how those efforts are going and perhaps give us an update on key country launches in the first quarter and in 2023. And then second question, on the new recommendation engine that you're using in certain European markets, do you expect to roll it out in the U.S. and other key markets and kind of any way to offer some color on the uptick in matches with the new REC engine? Thank you.

Sure. Hey, John, I'll take both of those. On the international expansion, our focus is really two prongs. Part one is continue to expand into new markets where we see opportunity. Part two is where we have already expanded to go deeper and deeper into those markets. The job is not done when we launch in a country. And on both fronts, we feel very pleased that the playbook that we've got is working really well. So If I take the Go Deeper piece as an example, we're still seeing rapid growth in Germany, in the DACH region, the German-speaking regions, in France, in other parts of Western Europe that we have launched in. And we're expanding both to more segments in our core cities and to new cities. That's also true in India, where we're seeing very, very rapid growth as well. And a lot of that is, if you will, geo-expansion inside of India, as well as continuing to go deeper in the key cities like Mumbai that we're already in. So that playbook, we think, is working well and is allowing us to continue to gain market share. And to refresh everyone's memory, the historical focus has been on Western Europe, South and Southeast Asia, Indonesia, the Philippines, Singapore, and parts of Latin America, particularly Mexico and the southern parts of Latin America. As it comes to new market launches, we're really focusing at least the first half of this year on on the other markets in Western and Central Europe that we believe have a strong opportunity. And I think Whitney mentioned Poland, Italy, Portugal, the Nordics as key markets will be focused on. But again, it really is in combination with these go-deep efforts that we've got as well. Moving on to the recommendations engine, we are absolutely expecting this to be a global rollout. As you'll recall, we obsessively test our products to make sure that they work. We do that with different segments or in different geographies. So for this machine learning based recommendation engine, we started it in certain markets in Western Europe, are seeing great results, which I'll speak about. And so now we are actively training the model in other geographies so that we can bring it globally as we use it for the best bees offering. As an example that Whitney mentioned, we would expect over time that to be a global offering, not just a Western European offering. And the results that we're seeing, as she mentioned, are really quite substantial. We are seeing double-digit increases in match rates when you're presented with this sort of super compatible recommendation versus our already very good recommendation engine that we've got the non-machine learning centric model. So we think that we're really adding a lot of incremental value on top of an already strong product. And that's what we think will allow us to monetize this further.

Thank you. Your next question comes from Mark Kelly with Stiefel. Please go ahead.

Great. Thank you very much. I wanted to ask you just about the marketing spend. I know Q1 is usually it steps up for you. With one of your main competitors commencing a fairly large brand campaign for one of their does that factor into how much you think you need to spend or maybe that doesn't? And I would imagine you would argue that maybe that one product I'm talking about is not a perfect comp to yours, but any thoughts there would be great. And the second, just on the college-focused product, is there a way to think about how many of those college users that you called out were incremental as a result of that launch? Thank you.

Sure, Mark. So on the marketing spend piece, We've always taken, number one, a very organic approach to our marketing. The marketing on Bumble app in particular is very focused on the strength of the brand and the mission and all of the work that we've done since day one of founding the company, and a large amount of our acquisitions come in because of that organic. So that remains core to how we think about marketing. On the sort of more discretionary pieces, the media-driven, the performance-driven pieces on top of that, We've operated and will continue to operate a very disciplined approach here. We're very ROI-centric. You'll recall that we've got payback periods on our marketing spend that are very, very short, which allows us to really manage this at a pretty fine-tuned level. So with one or more competitors out there spending a lot, we're having to be more nimble and find opportunities to really go out and make sure we're not overpaying for certain types of inventory. But Historically, when people have spent up, we haven't had a big concern about that, and we are seeing it spend up in a number of regions, and we're not seeing a big concern, as you can see our downloads continue to grow. So we feel very good that this disciplined approach and the heightened efficiency we build into marketing is working. On the college side, a lot of the emphasis is on being able to speak to college students in a much more targeted way. So it's not really a user acquisition program at its core. What it is is building the ability to offer a product experience that is different and customized and a marketing program that is customized as well. With the verification program we're having that ability to offer say college bundles virtual gifts on a very targeted basis It is we're finding leading to word-of-mouth like people like the experience and so that that will lead over time We think to us strengthening the depth that we've got with college students What would you like to add anything?

I just want to add that you know, we have such loyalty with the college audience our honey program has been a standout in our marketing for years and it continues to grow and so our relevance and our authentic residence with college students is something that we feel really cannot be replicated at this point. For example, I myself on behalf of Bumble, I'm starting a college tour this Monday where I'll be speaking directly with a lot of students and so I feel like we have this really unique and authentic approach with Gen Z.

Perfect. Thank you.

Thanks, Mark. Your next question comes from Ben Black with Deutsche Bank. Please go ahead.

Great. Good evening. Thanks for the question. Just sort of a follow-up to the last question. Your competitors are rebranding to better connect with Gen Z. I'm curious to hear what's really driving your success across these users. Is it marketing? Is it product-related? And how do you feel about positioned competitively there. And then secondly, I think you're included in Google's user choice billing program. Curious how that potentially impacts you from a financial perspective, if at all, and how that could potentially help from a product launch or product flexibility standpoint. Thank you.

Hi, this is Whitney. Thank you for your question. I'll start with Gen Z, and I'm going to weave women into that a bit as well. So as I said on my prior response, since the inception of Bumble, college has been such a huge pillar of our strategy. And we have been able to consistently stay hyper relevant with that community and to really reinvent ourselves year over year or quarter after quarter. And we have this unique ability to connect with the freshmen as much as we do with the seniors. We also have this strong resonance to graduate with them, right? We've built We've built ambassador programs even beyond college with alumni. And so we've also really now taken a super granular lens on building products designed to engage that audience better. So we are performing really well with this audience even prior to these optimizations. So we're feeling really good about the potential as we really iterate the product to be even more resonant with them. The one thing I do want to double-click on here, too, is Gen Z cares deeply about brands that are authentic and take a stance and are really mission-oriented. So this is something that is working very strongly in our favor. We have been a very mission-led, very customer-first brand for eight years, and this is really resonant. So one other quick note on the Gen Z topic. Women, Gen Z, millennial or otherwise, This is our brand mode. We have the brand strengths and the identity that we do because we have built for women from day one. And we are taking that lens with Gen Z as well. So this is not an opportunity for a competitor to just market or speak to women. That is something that cannot be replicated with a marketing strategy. That's something that has to be... authentically core to the DNA of a brand. And so I will tell you personally, this is something I feel we have a strong – we have a strong moat, and I'm really proud of our team for being able to sustain that. Tarek, would you like – or Anu?

On user choice billing.

Yeah, on user choice billing, you know, we don't expect that to have any impact on margins, as you know. we will still end up paying in aggregate the 15% that we pay today to Google Play. The composition of that is just going to be different. So from a margin perspective, we don't expect that that will have any impact at all. We are still very much in testing phase of what, you know, user choice billing looks like. And so, you know, if we have any particular updates to share on that, we will in the subsequent quarters.

Great. Thank you very much.

Your next question comes from Deepak Metivana with Wolf Research. Please go ahead.

Thanks. This is Zach on for Deepak. I guess just first on just price increase potential, obviously we're kind of in an elevated inflation environment. We've seen several consumer subscription services kind of utilize the price increase lever over the past several months. So just curious how you're kind of thinking about pricing increases philosophically on the core Bumble side, and if that's a lever that you guys are kind of looking at to kind of pull this year. And then second, just, you know, you've outlined, you know, robust product pipeline, geographic expansion. How should we think about kind of the headcount growth needs this year?

Thanks. Sure. I'll start with the pricing question. I mean, price, as we think about a price optimization, and pricing analytics and price testing are all core to the DNA of Bumble. This is something that we do on Bumble, Badoo and on Fruits on a literally daily basis and really are constantly trying to understand what is the elasticity a particular user might have and then adjust prices up or down as it maximizes revenue to a news earlier point. And so where we do see opportunities to increase and generate more revenue. By doing that, we will take advantage of that. Same on the flip side, right, where it's advantageous to decrease. I would say at the moment, we're not seeing a material change in appetite to pay or willingness to pay because of inflation. There's, I think, two sides to that coin, that other prices are going up, so you might have some more forgiveness, if you will. If you raise but wallets, you're getting stretched So it's a very segment-by-segment analysis that we go through, but it's a very active muscle that we exercise.

Yeah, and I think your second question was around headcount and how we think about where we expect to invest this year. So like I said earlier, we do want to lean heavily into making sure that our product and business teams have the best talent that we need to continue to be an innovator in this space. So all the stuff that you heard earlier around what's on our product roadmap, monetization, especially as it relates to newer things that we have around AI, machine learning, et cetera, et cetera, those are areas of headcount we want to invest in. We have a very sophisticated team already in place for things like pricing, revenue monetization, et cetera, et cetera, that we will be leveraging quite extensively. And again, remember, we operate from a shared platform infrastructure. So once we create a certain product initiative for Bumble, we are able to replicate it quite easily for but do and also take that learning this year to fruits as well. So that's definitely a lot of synergy as you think about knowledge sharing that happens between the product and tech teams for each of these apps. From a marketing perspective, we've never been one of those companies that requires brand new teams to show up in every market that we go to expand in. We are very, very nimble about how we think about growing in every market. We often talk a lot about, you know, on the ground field marketing, but that involves us hiring the, you know, the local influencer on the ground that doesn't require us to go and hire, you know, headcount and big teams on the ground. So again, you know, you'll see us continue to be very efficient from a geographic expansion and marketing spend perspective. And lastly, I will say, you know, from a corporate infrastructure perspective, I think we have largely, you know, this is We've just completed two years of being public. We are largely built out. We have a couple of pockets here and there that we still have to sort of fully build up. But really, I think investment in G&A is largely done. And again, you know, you should expect to see leverage as the next, you know, as this year goes by and obviously in the future as well.

Great. Thank you.

Your next question comes from Steve Krunig. with SMBC. Please go ahead.

Hey, thank you. That's pretty close. Steve Koenig. Hey, Bumble. Thanks for taking my question. This one's probably for you, Whitney. I'm curious how you think about maybe dating app fatigue in your more mature markets and how do you position Bumble as a positive contributor to mental health, enjoyable and fruitful and Maybe just your kind of philosophy around that. That'd be interesting. Thank you very much.

Yeah, thank you so much. And hi. So I just want to start by saying that we are extremely cognizant of the needs around dating and the needs around making it healthier, safer, kinder. I mean, this is our entire focus. Our tagline as a company is kind connections. So I do want to just reemphasize that people are meeting online. That graph is only going up. People will continue to meet online. This is a resilient industry. I have been in this industry for 10 years, and I can tell you that the demand remains stronger than I've ever seen. That said, I am personally taking it on my shoulders to figure out how to make it an even more enjoyable, even safer, more accountable experience. How do we really deliver what women want. And by delivering what women want, we make it a more enjoyable experience for everyone. But I will tell you that there is no disintegration of the want or need to meet people. And actually, meeting online is a quicker, more time-efficient, but also more economically efficient option for so many people. For people to get dressed up every night and go out to restaurants and bars where it's expensive and it's it's stressful. I mean, that is just not the reality. And so there is still such a huge opportunity here to take this strong demand for love and connections, which that is incredibly durable in and of itself, but to really continuously optimize our already very unique product and just drive exceptional value with, you know, strong engagement growth. And as you see record paying user additions, I think we offer a very compelling cost effective and really efficient alternative to the big spooky world of dating in the real world. So we are committed to this, and we feel that with our share gain, and particularly women in Gen Z, we are poised to have a great year ahead.

That's great. Thank you so much, Whitney.

There are no further questions at this time. Please proceed.

Operator, you can just conclude the call. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.