Bumble Inc.

Q1 2023 Earnings Conference Call


spk04: Thank you for standing by. My name is Sydney and I will be your conference operator today. At this time, I would like to welcome everyone to the Bumble Q1 2023 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, again, press the star and 1. Thank you. I now pass it over to Cheryl Valenzuela.
spk02: Thank you, Operator, and thank you all for joining us to discuss Bumble's first quarter 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 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, 2022, and our subsequent periodic filings. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the investor relations section of our website at ir.bumble.com. And with that, I'll turn it over to Whitney.
spk05: Thank you, Cheryl, and good afternoon, everyone. Thanks for joining. We are off to a great start to the year, delivering strong revenue growth and paying user additions in Q1. Total Bumble Inc. revenue of $243 million grew 16% year over year and was at the high end of our guidance range. Revenue growth was fueled by both payers and our PPU. Total paying users increased 15% to reach 3.5 million, and our PPU grew to $22.83. We achieved strong profitability with adjusted EBITDA of $59 million, representing a 24% margin, which exceeded our expectations. Our results demonstrate that online dating remains a healthy, attractive, and high growth market driven by powerful secular trends on an increasingly global scale. According to a Stanford study, which was updated recently, online dating has surpassed more traditional mechanisms to become the top way for heterosexual adults in the US to meet their romantic partners. This trend continues to grow in the U.S. as well as around the world, driven by advances in technology, digital first demographics, and shifting cultural norms. We at Bumble see this trend every day, and we feel very fortunate to be a rare technology business that brings people together in real life. Earlier this week, the Surgeon General issued an advisory calling attention to the devastating impact of the epidemic of loneliness, isolation, and lack of connection in the United States. In the face of this public health crisis, our work is more critical and more important than ever before. Just the other day, the team and I had the chance to dig through overflowing boxes of engagement, wedding, and baby shower invitations that had been sent by successful Bumble users to our headquarters in Austin. It is so rewarding to see the impact on the community that our products, team, and our mission brings to life. This also speaks to the ongoing market momentum we see. Bumble, Badoo, and Fruits remain among the leading apps in their core markets. This is reflected in the strong underlying demand we have seen in 2023 to date. With encouraging registration and download trends in most of our global markets, as well as the continued success of our brand, product, and monetization initiatives. Our team is delivering these results with a strong focus on operational efficiency. Over the last several years, we have been committed to expanding margins and have placed a high emphasis on managing our OpEx growth. We have demonstrated that our playbook, focusing on durable growth, delivers strong global expansion and high-quality user experiences. We have maintained this approach even in the face of elevated competitive marketing spend. While operating efficiently, we remain committed to investing for the future. There's a lot of talk about AI these days, and our teams are active in a number of areas. For us, this is not a new topic or focus. For years, we have been leveraging AI in our apps across safety, content moderation, our recommendations engine, and our personalization and monetization efforts. These results have driven real impact across the user experience. For example, the new AI-first algorithm that we mentioned last quarter increases the probability of a woman saying yes to a profile by 5x. This is just the tip of the iceberg in using AI to improve our curation and the quality of the connections that we can make. Our product engineering and marketing teams are baking AI into their key initiatives instead of it being a sideshow. For example, there are active efforts looking at how we can use the available toolkits to improve our marketing and software development effectiveness. We're also in the early stages of exploring AI assistance to help you improve your bio, get first date recommendations, or select the best photos to showcase on your profile, among many other optimization opportunities. We look forward to providing updates in the future. Now, let me turn to updates for each of our apps. First, Bumble app. In Q1, Bumble app revenue reached 194 million, with 98,000 sequential net ads and paying users. These results are a reflection of strong execution against the strategic priorities that I outlined in our last earnings call, namely international expansion, product innovation, and safety by design, as well as robust top of funnel demand. Starting with international expansion, we continued our market momentum with download share gains across both core and new markets across all of our priority regions, including Western Europe, Latin America, and India. This is in spite of very elevated levels of marketing spend that we're seeing from our global competitors. We are very proud of the results our team has driven in this environment while maintaining the spend and ROI discipline that we are known for. Looking at downloads for the full quarter in Q1, Bumble was the most downloaded dating app in the UK and Canada, in a virtual tie in Germany, and a strong second place position in the US, France and Benelux. We continue to maintain a strong traction in India and our key markets in Latin America and Southeast Asia. As a reminder, Our marketing playbook is focused on building durable, organic market positions on the strong foundation of our authentic, women-led, safety-first brand. Our net brand favorability with women in the US, UK, and France, especially for the critical Gen Z segment, is the highest of all major dating apps tracked by Morning Consult, the independent brand research group. This results in strong download share that translates into retained active users, high levels of engagement, customer success and word of mouth, and robust revenue growth. We are also on track with Bumble's exciting product roadmap this year. While we continue to focus on refinements of our existing products and further optimizations across pricing, targeting, and user experience, delivering new product innovation is critical to our brand strength and long-term growth. Here's a recap of some recent highlights. In Q1, we completed the full rollout of compliments in all markets. We are seeing revenue contribution continuing to ramp, and we're now focused on accelerating adoption of this feature, as well as driving incremental paying user growth. We are live in several key markets with our best fees offering. As I mentioned earlier, this offering uses our new AI algorithm to provide a higher level of curation for our members. Available today in a number of markets in Western Europe, we're excited by the early traction that we're seeing in terms of high levels of user engagement and matching. We are testing both subscription and consumable based monetization approaches for this and expect to accelerate rollout over the next several months. We have also seen positive results from enhancements that we've made to our speed dating feature. This enables members to meet and chat in an anonymous and more playful and low stakes format first before they're prompted to match. We've been able to increase the frequency of these events without losses in participation while simultaneously exploring monetization through both sponsorship and ticketed events. As we always do, we are actively experimenting with a number of new user engagement and monetization initiatives. These are generally small-scale experiments that let us learn how to improve the health of our business. A good example of this is a new product we're testing, which is a potential subscription tier priced below Bumble Boost and aimed at Gen Z users. The emphasis is on offering new services to help our users better express themselves, whether that be through additional compatibility assessments, stickers, virtual gifts, and photo effects. We expect to roll this out later this year and into 2024. And as always, we will do all of this with the safety by design approach. We will continue to take a comprehensive approach across product, policy, partnerships, and people to ensure that our users, especially women, continue to feel safe and empowered on our apps. Now turning to Bidoo. Bidoo and other revenue totaled $49 million. down 13% year over year. We remain confident in Bidu as it remains the leader in key markets and a top three app in many countries across Europe and Latin America. Bidu continues to be one of the top rated scale dating apps on the App Store and on the Google Play Store. While we still have work to do to further stabilize Bidu and return it to growth, we are encouraged to see registration and re-engaged users growing in several key markets. Our focus remains on shoring up retention and increasing engagement by focusing on quick, authentic, and feel-good connections, which are the hallmark features of Bidoo and what its loyal users love most about the platform. We are currently testing a new Bidoo experience built around different discovery mechanics, which significantly speeds up the time it takes to get a quality connection. Finally, on fruits. The team continues to execute well on their product roadmap, demonstrating strong growth in its core French-speaking markets. We believe the power of this product with Gen Z remains a unique differentiator, and we're also incorporating lessons learned from it in Bumble and Badoo. For example, we've leveraged some of Fruit's Gen Z pricing and targeting strategies in Bumble. The Fruit's product roadmap is very exciting, drawing on experiences that are gaining traction in social media apps. We believe these innovations will help it drive even greater market share in its home markets. In Q2 and Q3, fruits will also be taking its first steps into global expansion. Again, emphasizing the organic growth model that leads to a durable market position and favorable economics. In closing, our mission today remains the same as it was when I founded BubbleApp in 2014. to make relationships better, more equitable, and healthier for women in an effort to make relationships better for everyone. I firmly believe that we are making progress towards that mission every day on a global scale. The demand for love and connection is stronger now than ever before, and we believe our products deliver for this demand in a unique, safe, kind, and differentiated way with strong customer loyalty. I am fully committed to this vision over the long term. I have never been more excited about the future of our business. Deep gratitude and thanks to Team Bumble Inc., as always, for your dedication and hard work, and to our customers, partners, and investors for your continued trust and support. With that, I will now turn it over to Anu for a discussion on our financial results and outlook.
spk13: Thank you, Whitney, and good afternoon, everyone. I'll begin with the discussion of our first quarter results before turning to our outlook for Q2 and full year 2023. Unless stated otherwise, all comparisons are on a year-over-year basis. Total Bumble Inc. revenue in Q1 was $243 million, up 16%, and at the high end of our guidance. FX was the $7 million headwind for the quarter, and combined with headwinds from the war in Ukraine, impacted our growth rate negatively by 5 percentage points. Total Bumble income revenue was driven by paying user growth of 15% primarily from Bumble app and our people growth of 1%. Revenue from Bumble app was above the high end of our guidance range at 194 million, up 26%. FX headwinds negatively impacted growth by three percentage points. Bumble app revenue growth was driven by a 31% increase in paying users to 2.3 million. On a sequential basis, we added 98,000 paying users, resulting from strong growth in monthly active users, as well as increases in payer penetration. Bumble Apps, or Peepoo, was $27.93, down 4% year over year. This was primarily driven by FX headwinds and impact from country mix. Now moving on to Badoo App & Other. Badoo App & Other revenue was $49 million, down 13%. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rate negatively by 9 percentage points. Badoo app and other paying users excluding Fruits declined 7% to 1.1 million. Excluding the impact of our exit from Russia and Belarus, Badoo paying users would have grown over 2%. As Whitney mentioned, we believe we are making progress in stabilizing Badoo. On a sequential basis, paying users dropped 47,000 in Q1. Badoo app and other art people excluding fruits declined 7% to $12.47, primarily due to FX. Turning now to expenses. We are more focused than ever on managing the business profitably with a high bar for incremental spend and headcount. We are pleased with the progress we have made in the first quarter towards our margin goals for the year. while also achieving our top-line objectives. We continue to believe we have room for further leverage in our business and remain committed to expanding margins in the long term. Total gap operating costs and expenses were $234 million for the quarter. On a non-gap basis, excluding stock-based compensation and other non-cash or one-time items, our total non-gap operating expenses were $184 million, up 15%. Cost of revenue was 69 million and grew 27%. The increase was primarily driven by higher app store fees as revenues have grown, as well as shift away from third-party billing to Google Play on Android. As a percentage of revenue, cost of revenue was 29% versus 26% in the year-ago period. Sales and marketing expenses grew 3% to 60 million. This represents 25% of revenue versus 28% in the year-ago period as we focused on efficiency in marketing spend during the quarter and stayed disciplined on ROI thresholds across all campaigns. G&A expenses were 32 million or 13% of revenue compared to 30 million or 14% of revenue last year. Product development expenses were 23 million or 9% of revenue versus 18 million or 9% in the year-ago period. Q1 gap net loss was $2 million compared to net income of $24 million in the year-ago period. Q1 adjusted EBITDA was $59 million, up 19%, and represented a 24% adjusted EBITDA margin. We ended the quarter with a cash and cash equivalent balance of approximately $389 million down from Q4, primarily due to timing of receipts. Now moving on to our financial outlook, for Q2 and full year 2023. For Q2, we expect the following. Total revenue between 254 million and 258 million representing a growth rate of 17% year over year at the midpoint of our range. We expect Bumble app revenue to be between 205 million and 208 million representing a growth rate of 23% year over year at the midpoint. Our Bumble app revenue guidance includes expectations for sequential net ads of approximately 120,000 to 130,000 in Q2. We expect Bidu sequential net ads to be flat to slightly positive in Q2. We estimate adjusted EBITDA will be between 62 million and 64 million, representing 25% margin at the midpoint of the range. For full year 2023, our view on full year expectations has not changed since our last earnings call. We maintain our estimate for total Bumble Inc. revenue to grow between 16% to 19% year over year. We are pleased with the performance of Bumble app so far, and we maintain our expectations for revenue growth rate of between 22% to 25%. With regard to full-year adjusted EBITDA, we expect at least 100 basis points of year-over-year margin expansion. Today, we announced that our board of directors has authorized a share repurchase program for up to $150 million of our outstanding Class A common stock. We have a strong liquidity position with low net leverage and continue to generate free cash flow. Our priorities from a capital allocation perspective remain to invest in growing the business organically as well as in pursuing M&A opportunistically. Beyond these investment opportunities, the share buyback program provides us flexibility and allows us to return capital back to shareholders. To summarize, we achieved strong top line growth this past quarter while staying disciplined with our expenses. We believe we are in a good position to continue gaining market share amidst a dynamic and competitive environment, and we are excited about our product roadmap for the year. We plan to carry forward this business momentum we have built in the first quarter through the rest of the year. Thank you, and with that, operator, we can open it up for Q&A.
spk04: Thank you. At this time, I would like to remind everyone, in order to ask a question, press star, then the number one on your telephone keypad. Our first question comes from Alexandra Steger.
spk11: Thank you for taking my questions. Could you maybe dive a little deeper into the progress you're making in the various international markets developed versus emerging given the elevated competitive marketing spending you mentioned? And how should we think about the pace and cadence of new market launches versus prioritizing existing regions for the remainder of the year? And then maybe second, Can you just remind us of your philosophy around pricing increases or optimizations? Is there room to optimize pricing in this type of environment? Thank you so much.
spk08: Hey, Alex. It's Tarek. Thanks so much for the question, and I'll try and tackle both of those. I think as it relates to international expansion, we remain very pleased with the progress that we're making in our in international markets. I think it continues, excuse me, to be a source of strength for the business. And we are seeing, as Whitney mentioned, we're seeing continued traction from a download share standpoint, as well as just continued absolute levels of growth really throughout Western Europe, throughout the markets we've launched in Latin America and India and in Southeast Asia. You know, we are seeing that our focus on what we internally refer to as durable growth, this um this notion of let's build an organic base in these countries let's make sure that we do that in a way that generates the word of mouth and virality that we need in these countries so that you build um resilience into the and and robustness into the growth model that that model really does work and continues to work really well um it has made us we think quite resilient in the face of very elevated levels of marketing spend that a number of our competitors are putting into market. And what we've seen is even when you do see those elevated levels of spend, it's not really diminishing the trajectory that Bumble has in those markets. So we feel very good about our position. And again, our focus is very much on getting the downloads and converting those users into active users who are willing to engage at a high quality level and are eventually willing to monetize. So we're very pleased with that. In terms of the cadence, we are pleased with progress we've made in Western Europe. There's a couple of more countries in Western Europe where we've got some more work to do. We launched Spain later in the year last year. We're continuing to focus there. Italy, the Nordics, some parts of Central Europe are a real focus this year. But I do want to reiterate that the job is only just getting started when we launch into a market and it really is about building depth in that market and that's where that's the million dollar question if you will and so we're really focusing on that um you'll see us um continue the the focus we have on parts of latin america and southeast asia as well but really the primary emphasis is is western europe in terms of pricing um we I think we mentioned this in the last call, but one of the real core strengths that we probably haven't said all that much about is the data analytic foundation that we've got inside of the company. We've got just an amazing platform that we've been overhauling over the last couple of years that allows us to do a level of personalization, a level of personalized data analytics, and as a result, price optimization at a very, very fine tuned level. This is something that has really fueled the company historically, and it's something that we are constantly working on. We think that it's a large part of the story to date that you've seen in Bumble and Badoo, and it will continue to be a large part of the story moving forward as well.
spk11: Great, thank you. Thank you.
spk04: Your next question comes from Corey Carpenter.
spk01: Thanks for the questions. um on the bumble app 2023 outlook anew could you just talk about your latest thinking around expected contribution of net ads versus arpu i think you previously talked about a 450 to 500 000 range um as well as the cadence of that through the year and then non-financial related uh one of your competitors is raising prices and they're losing some subscribers as a result uh curious if you view this as an opportunity to take share Or maybe if there is evidence already that perhaps some of those users are moving over to Bumble. Thank you.
spk13: Sure. Hey, Corey. Thanks for the question. So I think, as I said in my prepared remarks, we are, for Bumble app, maintaining our full year revenue cadence of 22% to 25%. That also translates to our net ads expectations, so we still expect the 450,000 to 500,000 net ads for the full year that we had guided to. For Q1, we had said we would do between 90,000 to 95,000. We're very happy that we came in just a little bit higher than that at 98,000. We are expecting for Q2 we will be between 120,000 to 130,000. And then Q3, we expect we will be above that. And then from a seasonal perspective, Q4, as you all know, we will be slightly lower than where we end up in Q3. So that's the cadence of what we are expecting. Again, this is very similar to what we had talked about in our previous earnings calls, and nothing really has changed. I think we've been very happy with how the business was performed and excited about the product roadmap that Whitney talked about earlier. So we'll obviously share more. In terms of our people, again, I think for the full year, we're expecting that our people will come in maybe slightly lower than the 2022 average our people that you saw. But as we always say on a practical basis, our goal is always to make sure that we are maximizing payers and our people for each product that we put out based on what is relevant and what's important for that product experience to look like. So obviously there are all these puts and takes between payers and our people to some extent, but largely I think what I just talked about should very much hold true. And then maybe I'll just also mention for Bidu, We, from a NetApp perspective, we had guided to about negative 50,000 for Q1. We came in at negative 47,000. We feel pretty good that we will be in a sort of stable deposited territory in terms of NetApp for Bidu. So we are sort of pleased with how, you know, the business there has been performing. We definitely have work to do there, but we definitely feel like it's on the right path. So, yeah, that's the update on Bidu.
spk08: your first question i'll pass it over to tarik to talk about the sure the pricing stuff um in terms of some of the competitor price increases i think what we are what we fundamentally believe is people decide whether to pay on bumble based on how happy they are with the bumble experience um certainly as it becomes potentially less attractive from a pricing standpoint to spend on a competitor i suppose that could be positive for us still too early to tell if that's the case what we do feel very good about is that, as Whitney mentioned, the net favorability, which is how many people have a favorable impression of Bumble versus have an unfavorable impression of Bumble, is the highest, let's say, in the US of any of the major dating apps tracked by Morning Consult. So we think we're set up well to continue to be a preferred platform for people who want to participate in dating apps and who want to pay. And in fact, if you looked at Q1, as our net ads numbers suggest, our new subscriptions and our payer penetration rates remained healthy and were actually increasing towards the end of Q1 or throughout Q1. And so we do think that there are some nice tailwinds in the business.
spk04: Your next question comes from Shweta Kajuria.
spk12: Thank you for taking my questions. Could you please comment on the demand trends that you're seeing? Your competitor recently mentioned there's some headwind on bear a la carte because of macro headwinds. What are you seeing specifically in North America versus international markets? And then the second question is what – When you talk about greater focus on operating efficiency, could you, Anu, please talk about what exactly you are focused on? What drove the EBITDA upside and where could be potential efficiency gains to be had when we think about EBITDA and margins? Thanks a lot.
spk08: Sure. I'll start with the demand question and then turn over to Anu. So we are really seeing quite nice top of funnel demand in general, I think, across Bumble and Badoo, you know, towards the end of the quarter, again, Badoo was seeing a very nice level of registrations, and that continued into April. And Bumble has been quite strong from a registration standpoint. As I just mentioned, as you look at paying trends, what we basically see is that new subscriptions are continuing to be strong. Forest payer penetration continues to be strong. I'll speak about Bumble app here for a second and actually modestly improved throughout Q1. So I think that is a good sign. Our renewal rates for ongoing subscribers, meaning people who have been subscribers for multiple months, remains healthy and also saw modest improvements throughout Q1 and in April. So generally speaking, seeing pretty healthy demand trends. The exception I would say is If you look at this at a segmented level, and by the way, to your question, those were sort of global trends. I think you saw that in the U.S. You also saw it in our other major markets. As you look at the more segment level, we are still seeing pockets that are economically challenged. And that, you know, particularly if you looked at our Gen Z segment, you'd see some level of economic challenge there. So that is still leading to some challenges on that first-time renewal. meaning there are some people who do want to be a subscriber. They'll use it for the month, and then they'll choose not to renew because they're economically stretched. That is something we're keeping an eye on and continuing to work on with some of the value messaging and things like that. But again, overall, we're seeing quite a nice demand picture. On the consumable side, we're also seeing very strong demand there. Actually, our larger consumable packs are actually doing probably the best of all the consumables that we offer. So I think we're seeing quite a different trend there than what others might be seeing.
spk13: Yeah, and in terms of your question about EBITDA, I think for Q1, I would say the majority of the outperformance that you saw was really us being very disciplined on both marketing spend as well as in headcount. On the marketing side, we've been constantly reviewing all our campaigns, looking at all the associated returns in every market, and trimming budgets based on that. We obviously, based on the top line numbers that you see, we haven't seen any loss of efficiency. So all of this is just us getting better and better in getting the returns that we want. We would definitely like to see if we can spend some of the marketing dollars that we saved in Q1 and Q2. And that's why we haven't increased our full year guidance for EBITDA yet, but it's definitely something that we'll continue to look at on an ongoing basis, but we feel very confident in being able to get to the at least 100 basis points of margin expansion that we are guiding to for the full year. And in terms of headcount, I'll also mention that over the last few years, we've had an ongoing cadence of continuously reviewing different parts of our organization in terms of how much we are funding each of those groups. We've been pretty judicious over the last few years in terms of how much we've grown the pandemic and in the last couple of years so this isn't something that you know we're just doing for the first time this this year this is definitely something that we've always been very good at doing internally and i think i mentioned this the last time as well our teams have been told that the bar for incremental headcount is very high and you know certain critical areas are definitely being funded um areas like um obviously we can talk a lot about ai so augmenting our engineering teams to make sure that we have the right skill set around some of the things that we want to build and develop. We are definitely looking at funding. But otherwise, like I said, the bar for how you're thinking about incremental headcount is pretty high. And again, this is something that, you know, we are going to continue to keep a very close eye on because we want to make sure that we're investing in the right things to maximize our top line.
spk12: Okay. Thank you, Tariq. Thank you, Anu.
spk08: Thank you.
spk04: Your next call comes from Lauren Shank.
spk03: Great. Thank you, too, if I can. I think relative to what we know you're running sort of end of February and an AK that you put out, it seems like March accelerated really nicely. Is there anything from a specific product feature, geography, monetization that drove that acceleration or just sort of broad-based improvement? And then secondly, just on the EBITDA margin guide for the second quarter, a little bit, I think, below where the street was expecting. Is that just a shift of marketing from one Q to QQ? Anything else to call out there? Thanks.
spk13: Yeah, I think I'll maybe start with the second question first. Nothing, you know, specific to call out on Q2. I think we've said before, our first half tends to be just seasonally, you know, a higher quarter in terms of marketing spend. Now, you know, we said this in Q1 as well, and eventually we were able to spend less and still achieve the top-end efficiency that we wanted. We are earmarking certain funds for certain campaigns in Q2, but again, like I said, I think our goal would definitely be to try and maximize efficiency wherever we can. It doesn't change the trajectory that we have for the full year. It's just purely a function of timing of how some of our campaigns are landing. And I think in terms of the payer cadence for Q1, I think it's important to remember that the net ad number has a lot of things that can impact that. So it's not always easy to sort of just draw a correlation between the months. If you look at the year-over-year sort of growth rate, January was slightly lighter than you would have normally expected, but Feb and March did very well. It was in line with how we had planned our product cadence it was in line with what we were planning for in terms of top of the funnel user growth as well and also the payer optimization work that we have planned for the quarter so this was definitely something that we were expecting and obviously when we guided to the numbers we were very confident that that's um the the number that we would we would end up in and we came in you know slightly higher than that um so nothing specific to color other than um you know, what had been sort of planned from a user growth and product perspective.
spk03: Okay, great.
spk04: Thank you so much. Your next call comes from Benjamin Black.
spk06: Hi, thank you for taking our question. This is Ishan Goel on for Ben. It would be great to hear your thoughts on the recent developments within App Store fee, and do you sense that App Store fee release could be a 2024 event? Thank you.
spk08: Hey, sure. So, you know, we are certainly paying a lot of close attention to this and both what Apple and Google are doing. And as we've said, as we talked about before, we are pleased to be in the user choice billing program at Google as just one example of the efforts that we're taking. I would say at the moment, we are quite positive on the impact on users, you know, we do have increasing evidence as these different programs are rolled out that users do want choice in how they are able to pay for our services. And as we offer them more forms of payment, you see people opting for those other forms of payment. And that, generally speaking, is a good thing. So we're very positive on the user experience side and on the, you know, the payer side, if you will, on On that front, in terms of the fees themselves, I would say it's not a clear picture at the moment. We're not anticipating, frankly, any major apps for relief this year. And next year, I think this is all hard to say. The net effect of some of the changes being proposed by Apple and Google could actually be to raise the fees that you have to pay as opposed to lowering the fees. So I think it's a very murky picture, and there's a lot of detail that needs to be worked through by all the different platforms.
spk06: Thank you very much.
spk04: Thank you. Your next question comes from Justin Patterson.
spk07: Great. Thank you. Good afternoon. Whitney, I was hoping you could touch a little bit more on just marketing toward Gen Z. It seems like something that many companies have been struggling with. So I would love to hear a little bit more about how you're positioning that potential new product to really attract that demographic more. And perhaps as a follow-up to that, I would love to hear you just elaborate a little bit more about the testing features within Bumble. I know some companies just optimize for revenue growth. I'd be curious to hear about how you're thinking about just the broader user experience within there and making sure that you're not sacrificing the health of the product in order to drive revenue growth. Thank you.
spk05: Yeah, hi. Thanks so much for the question. So to start with Gen Z, I think it's important to note that a significant driver of our success in these recent quarters has been the steady growth that we're seeing in our Gen Z user base. And that's particularly in the US. And so as you can imagine, this is very exciting as we are successfully acquiring this user base of the future. And I mentioned that Bumble app also led other dating apps in terms of MPS scores among US Gen Z and Q4. So that's another proof point that our appeal to this very important market is, you know, it's really resonating. We have recently began to build products designed to engage our Gen Z users. So the fact that we're performing so well with this generation without really optimizing the platform yet for them is a positive. I'll talk about that in a second. I just want to take a second and double click on our unique understanding of the college audience and how this is not new. This is something we have been so focused on since I started the company in 2014. So we have this scaled program with what we call Honey Ambassadors. And because we have consistently and constantly evolved that and stayed current with that, where we don't age with them necessarily, we're always bringing in the freshmen and the sophomores and the juniors and the seniors along with us. We've really invested in this audience and we can really relate to them in a number of ways. not only from the product side which you know will be consisting of things like virtual gifts and you know optimizing speed dating for them and really leaning into that gen z women's experience and this deeper focus of this audience specific content messaging but we're really good at marketing to them so we have this unique hook in with the influential college students this is something you know competitors can't can't go and just acquire. This is something we've built over the years. It's a deep, ingrained network effect. And so that is really paying off for us because of those roots that we've planted over the years. And then one thing I'd like to touch on is this low-tier offering that is going to be paired with kind of the college bundle that we've talked about, which we're pleased with those results with those initiatives to date. you know, a big priority for this college age group is to really test a range of different features that target this particular audience. As I said earlier, that's virtual gifts, and this could be even new experiences that are, you know, very social ways to engage. This could be stickers, photo effects, or other ways to express themselves. So that is in its very early stages of testing, and we do not expect to have Amy Nunez, Any material contributions of this in 23 but we're very excited about the prospect for this given that growing and robust. Amy Nunez, User base before I hand it to target just want to double click on user joy, so this is something we are obsessed with, I want to reinforce that, while we are really good at delivering our numbers and staying really you know incredibly efficient. We operate for the long term. This is a long term committed business and without customer joy and satisfaction, that's impossible. And so that is always front and center at every product roadmap, at every strategy meeting. And this is absolutely mission critical with Gen Z and particularly women. So I think you see that through our results. Whitney Barnes- And so you know I just I just want to reinforce that well we're great at pricing and optimizing revenue it's never at the expense of customer joy safety satisfaction with that chart would like to add anything i'll kick it down.
spk08: TAB, Mark McIntyre, The only the only thing I would build on top of what when he said is as we. TAB, Mark McIntyre, Look at our experimentation plan as we talk about what we're solving for, of course, at the end of the day, we look at. revenue payers efficiencies things like that but those are all output metrics right and those are not actually what our teams solve for per se what they solve for are the input metrics and the input metrics get back to what when he's talking about we know that if we are able to better match you and better get you matches on the platform you're more likely to be retained on the platform until you find the person that you want to you know be with and then you leave and we know that you're more willing to pay if we are helping to generate high relevance for you and and that we're able to do that in a safe and respectful way and so the our teams from an experimentation standpoint are really looking at that customer journey at the dynamics of the of the ecosystem and and we kind of know that when we are able to make that ecosystem really work well it leads to more paying users, more revenue, more EBITDA for us. So that's essentially the philosophy the teams work with.
spk07: Great. Thank you both. Thanks, Justin.
spk04: Your next question comes from John Blackledge.
spk10: Oh, great. Thanks. Two questions. First, could you provide some more color on complement the kind of the usage of the feature and how it's driving monetization and payer conversion? And then second area on AI and machine learning, is the AI that you use kind of across the safety and the recommendation engines, et cetera, all from kind of internally developed capabilities in-house? And then kind of going forward, would you expect to partner with any of these emerging gen AI companies to drive improvements kind of either in the apps and or to drive efficiencies across the business and marketing and software coding, et cetera? Thank you.
spk05: Thank you so much. So I'll set the stage on AI machine learning. So I think it's very important to note that AI is not some new thing for us at Bumble. Our work has been deeply rooted in a lot of machine learning and AI, you know, historically, but we are really excited about the way AI can really benefit our business moving forward. So I think Before I get into the in-house or other, I will just talk about how we see this enhancing our business, really across three main domains. I would say starting with better products, using internal tooling or taking this trust and safety and machine learning recommendation engine to the next level by deeper integrating with external large language models and data labeling, And then the second category is really building faster. We think that there's a huge optimization opportunity and productivity opportunity, which really improves engineering and marketing efficiency by adopting AI-based code generators and automation frameworks. And then the third category is really new products. And this is enhancing the product experience. What I mean by enhancing the product experience, it might be adding something new. that doesn't exist yet, or it could be an optimization of something that, say, someone struggles with on the product journey. So we see this really as an onboarding to your real life date opportunity. This could start with struggling to pick the best photos. This could be helping you write your bio or set up your profile with the touch of a button. There's so many opportunities along the way. We're also a business, before we turn to compliments, based on women making the first move. And this has been such a driver of our success and it continues to be. But we believe we can lean into the optimization of that, make it easier for women, make it safer and faster and more enjoyable overall. And so there's tons of opportunity here to really drive performance improvements across the board. And before I take it to TARP to double down on the integration strategy on AI, I will just touch on compliments briefly. So compliments, by way of update, compliments was really our first foray into the message before match category. We have continued to expand the compliments feature and we are growing adoption and increasing retention, both things we've been very committed on. So in Q1, our focus was really on growing adoption and we are seeing promising results. So thus far, Nearly 15% of our Bumble monthly active users have sent a compliment. And we're very confident in our ability to grow that penetration over time through things like continuous product design improvements and strategic placement in high intent scenarios. And broader feature education and also marketing the product outside of the APP which you can expect to see this summer. And we've also prioritize ensuring a strong and safe user experience as we scale this feature and roll it out more broadly, so we are working on the receiver experience in tandem, so given given its recent rollout. Complements revenue contribution is fairly modest today, but it is building momentum. So we're very excited about the potential and we expect revenue from compliments to ramp over the year. Tarek, would you like to add anything on AI?
spk08: John, the only thing I would, so the models that we've been using historically are internally built models. They work really well. We've actually benchmarked them against the externally available large language models from the usual suspects. in most content areas they they benchmark actually better it's a really a reflection of the fact that it's tuned to our data and and at the moment that tuning you know beats out the sort of power of the other models we are experimenting exploring um you know how do we have a best of both worlds type of model where we use our internal capabilities and supplement that in areas that were weaker with some of the external models we're pretty happy with some of the
spk04: of offline experiments we've done on this so far and i think we'll be doing more in that area thank you as a reminder if you'd like to ask a question press star then the number one on your telephone keypad our next question comes from laura champagne thanks for taking my question it's about badu which i know is only 20 of your business but
spk09: I think we keep waiting for it to stabilize revenues from that unit still down double digits this quarter. What are the signs of stabilization that you're seeing? And when do you think we could see a positive turn in BADU's revenues?
spk05: Yeah, thank you so much for the question. So I think it's important to reemphasize that BADU has maintained its strong position. So BADU really continues to be a leader in its key markets. it's still a top three dating app in a number of countries across europe asia africa and latin america and late q1 and continuing into april we have seen the due return to registration growth and we've achieved good progress in stabilizing revenue so these are the first steps in really returning the due to that growth and we continue to execute our strategy to deliver these results and there's of course still work to do but do was very challenging you know, had a series of challenging events between COVID and the war in Ukraine, we still remain confident in Bidu's long-term opportunity and that value proposition. So turning to the product side, we've shared this in the past, but Bidu's most, you know, loyal customers care about this instant connection and spontaneity that this product uniquely delivers. And we're really continuing to lean into that. We attribute the return to more positive numbers to this strategy and to really listening to the customers and building for them. So really that paired with enhanced monetization offerings to really offer promotional bundles and new consumables, we're feeling better about the Bidu story. And we have delivered several revenue and ecosystem experiments. throughout Q1, and those resulted in improved revenue trajectories in key markets. So we expect to be active internationally with, you know, market expansion efforts and APAC and continued investment in LATAM and Eastern Europe. So with that, Anu, I think you want to make a comment?
spk13: Yeah, and I think in terms of, you know, when we expect Bidu to be positive year over year, Based on our guidance, you can see the goal for 2023 is for the BUDU and other line items to start to stabilize. We are still not expecting that it will be in positive territory this year, but the goal definitely is to get it to be stable and then get to positive. I think the first step towards that is getting sequential net abs to be positive, which is a path that we are on for Q2. Like I said earlier, we recognize we still have a little bit more work to do there, but we definitely feel like we are on the right path.
spk09: Understood. Thank you. Thank Flora.
spk04: There are no further questions at this time. This concludes today's conference call. You may now disconnect.

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