This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk05: We'll talk to Q4, like the first person to do that. Thank you.
spk06: Hello, and thank you for joining Bumble's 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. To ask a question during the session, simply press star followed by the number one on your telephone keypad. I will now hand the conference over to Cheryl Valenzuela, Vice President of Investor Relations. Please go ahead.
spk03: Thank you for joining us to discuss Bumble's second quarter financial results. With me today are Whitney Wolf Hurd, founder and CEO of 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 referred to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not to substitute for or in isolation from our gap results. Reconciliations to the most comparable gap 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.
spk04: Thank you, Cheryl, and good afternoon, everyone. Thanks for joining our call today. Our second quarter results demonstrate the strength of our apps and our solid execution on our goals for the year. We delivered a strong quarter with better than expected revenue growth, accelerating paying users, and robust profitability. Total Bumble Inc. revenue of $260 million was up 18% year-over-year, driven by Bumble app revenue growth of 23%. Our total paying users increased 20% to reach 3.6 million. An adjusted EBITDA was $67 million, representing a 26% margin. With loneliness on the rise globally to the point that it's been declared an epidemic in the US, there is considerable room for each of our apps to grow and have significant impact on people's lives. We have a well-constructed portfolio of apps to bring people closer together. Within dating, we have an extensive global footprint where we have at least one top three apps by download share in over 50 countries. Our focus is on continuing to drive market share gains opening additional new markets, and driving further depth of engagement and payer penetration. Let me provide an update on each of our apps. I'll start with BundleApp. Q2 revenue grew 23% to $208 million, driven by continued momentum in paying users. From Q1 to Q2, we added 139,000 payers, a significant acceleration from the 98,000 net ads we reported last quarter. The growth in payers was fueled by strength and top-of-bundle metrics, including new and re-engaged users, reflecting the overall health of Bumble's ecosystem and our continued payer optimization efforts. As we've discussed previously, Bumble app's business model is built around generating durable growth. We focus on building preference, particularly with women, for our brand and our product, which in turn drives strong word of mouth, downloads, and high engagement. This delivers consistent growth quarter after quarter and is sustainable as we scale. The results are clear. Our core markets continue to grow, fueled both by new registrations and re-engaged users. Our newer markets in Western and Southern Europe and key markets in Latin America also continue to perform well. On the product side, I'm proud of how well our team is advancing our vision and roadmap. Let me begin by updating you on some of the initiatives we've discussed previously. First, Compliments. Our message-before-match feature continues to ramp in both usage and revenue contribution. Its unique value proposition has landed well with early adopters. This feature is driving improved brand perception and engagement, as compliments recipients are 70% more likely to get a match. We're continuing to invest in the experience to drive greater awareness and adoption. We are also excited with the traction of Best Bees. our new feature that leverages the power of our new AI algorithm to curate match recommendations for users. We were pleased with our initial test and decided in mid-Q2 to accelerate our rollout. Best Bees was added to our Bumble Premium subscription tier in late May and is now available worldwide. Early indicators have been positive, and after bundling Best Bees into Bumble Premium, we have seen uplift in both new subscribers and renewals. We also see Best Bees improving chat initiation rates. Best Bees also illustrates the practical and powerful ways we are employing AI to improve our customer experience. As I said last quarter, while AI is already core to several initiatives, including the recommendation and personalization experience, as well as our safety efforts, we are now exploring opportunities to bring generative AI into our users' experience. A few examples. providing interactive advice on improving and curating profiles, enhancing the relevancy and compatibility of matches, and preventing toxic behavior. Overall, GenAI will be a catalyst in reducing friction and pain points along the dating journey. At the start of the year, I talked about the foundational engineering work we've done that enables us to be more flexible with our subscription and consumable offerings. Bumble has successfully grown revenue primarily through two subscription tiers, Bumble Boost and Bumble Premium, with the majority of our paying users on the higher price tier. Two years since the introduction of Premium, as we look at the needs of our users on our service, it is clear that there are opportunities to further expand our subscription offerings on both ends of the pricing spectrum. We are continuing to test a base subscription tier to create a differentiated experience and more affordable offering that will appeal to GEMSI members. Based on our high quality user base, we have conviction that there is also demand for a higher price product above Bumble Premium. We believe this higher tier will appeal and provide value to existing Bumble members with more serious dating intent. We expect this will also resonate with singles who are not currently using dating apps because they desire more curated experiences. We will start testing this product later this year. Bumble's product momentum is supported by marketing that showcases our brand and mission. According to Morning Consult, Bumble continues to retain the top net promoter score among dating apps for women in the U.S., and this favorable brand awareness translates into valuable customer acquisition opportunities and makes us a highly sought-out marketing partner. I'd like to highlight a couple recent examples of our marketing team's great work. In late June, we launched Summer of Kindness. our global integrated marketing campaign built around our feature launch of compliments. The campaign centers around the power of kindness, which is engineered into the Bumble app. To highlight this, we rolled out a film called Kindness is Sexy, as well as outdoor ads, partnerships, and influencer campaigns, spreading compliments around key cities. Last month, we also kicked off a category exclusive partnership with Barbie. the worldwide number one movie of the summer via a 360 global co-marketing campaign where we encouraged users to have the best day ever by receiving motivation from the film's many Barbie and Ken characters to send compliments on Bumble. We were the only dating app to garner a partnership with Barbie, which is another great example of our strong and differentiated brand. Feedback for both of these launches has been overwhelmingly positive, And I'm proud of how well they represent Bumble's mission and values. Now turning to Bidoo. Bidoo app and other revenue totaled $52 million in Q2, up 2% year over year. This is the first quarter of year-on-year growth for Bidoo since the first half of 2021. I'm excited that Bidoo's turnaround plan is having the desired impact and the business is on a good path to stabilization. On the product side, we've been modernizing the app, minimizing friction in the user experience, and providing our members with new ways to interact that are more in tune with the post-pandemic environment. These efforts have begun to bear fruit, with strong new user growth in most of our markets alongside improvement in engagement trends. Monetization continues to improve as well, with sequential paying user net ads of $34,000 and several of Badoo's top markets returning to positive revenue and pair growth this quarter. We plan to build on this momentum in the second half with a brand refresh and continued innovation on its core discovery mechanics to help people instantly connect with the most relevant matches for them. Fruits also continues to scale. It launched in the UK, a meaningful first step in expanding beyond its base of French-speaking markets. Early results have been promising. particularly with Gen Z adoption and engagement, and we plan to introduce fruits in more markets in the coming months. A key part of our broader growth strategy is to strengthen the ecosystem of connections, whether it's new relationships, established couples, or friendships. Part of my original vision for Bumble has always been building relationships beyond dating. We believe there is tremendous opportunity in this expansion, and we recently took two important steps towards building out that vision. First, we acquired Official, an app that strengthens existing relationships by providing date ideas, mood check-ins, and other features for couples. Official is available in 45 countries and has been downloaded more than 1 million times since it was launched. Official helps relationships that start on Bumble, Badoo, Fruit, or anywhere else maximize their full potential. This opportunity can increase the lifetime value of our customers and open up broader lifestyle business adjacencies. Second, I'm thrilled to announce that our new and standalone BFF app, Bumble for Friends, is now live in several countries, including the U.S. The app is built to create a new way for people to discover meaningful, kind, and fun friendships in their local area. It maintains what people have loved about BFF and adds a new, easier way to plan group activities. We are launching at an opportune time with more people open to making friends online than ever before. In a recent Bumble for Friends survey, two-thirds of Gen Z respondents shared that making new friends online lessened their loneliness, And we are uniquely positioned to make a difference in this space. We have seen strong early results with the new app. Gen Z engagement is a particular standout. By the end of Q2, our youngest BFF users were spending 34% more time per week in the app compared with the equivalent BFF mode cohorts. Over the next several quarters, we'll continue to invest into the experience based on member feedback. We'll also begin testing several paths for monetization, although we don't expect material revenue contribution this year as we prioritize the user experience. In summary, it has been a productive and rewarding first half of the year. As a company, we have been very customer-centric, nimble, and decisive. We have achieved substantial progress on the product front. We are executing well and we are continuing to deliver on our strategic priorities. Our strong first half positions us well to achieve our goals across our growing family of apps for the balance of the year and into 2024. Before I conclude, I would like to take a moment to thank Tarek for all of his contributions to the company. He has been a great leader and we wish him the best in his future endeavors. Thank you, Tarek. And of course, deep gratitude and thanks, as always, to Team Bumble for their unwavering commitment and hard work in support of our mission, and to our customers, partners, and investors for their 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.
spk02: Thank you, Whitney, and good afternoon, everyone. Our second quarter results demonstrate the unique appeal of our app and the strong execution of our team. Total revenue growth was robust, driven by product initiatives and international expansion at Bumble app and continued progress towards stabilization off-the-do. On the expense side, we continue to operate with discipline around spend, driving strong free cash flow while investing in the long-term strength of our app. I'll walk you through our second quarter results before turning to our outlook for Q3 and full year 2023. Unless stated otherwise, all comparisons on a year-over-year basis. Total Bumble Inc. revenue in Q2 was $260 million, up 18% year-over-year, and above our outlook. Total paying users reached $3.6 million, up 20%, with both Bumble and Bidu payers showing sequential and year-over-year growth. Total RP pool was $23.23, down 1%. Revenue from Bumble app was $208 million, up 23%. Bumble app revenue growth was primarily driven by a 28% increase in paying users to 2.5 million. On a sequential basis, we added 139,000 paying users in Q2. Paying user growth was driven by strength in active users and solid improvements in payer penetration. Bumble Apps are People was $28.21, down 3% year-over-year, and up 1% sequentially. The year-over-year decline was primarily driven by geographic mix shift. Now moving on to Badoo App and Other. Badoo App and Other revenue was $52 million, up 2% year-over-year. Badoo App and Other paying users, excluding fruits, grew 7% to $1.2 million. On a sequential basis, paying users grew 34,000 in Q2. Badoo App and other RPPOO excluding fruits declined 5% to $12.83, primarily due to pricing optimizations and geographic mix shift. Turning now to expenses. We continue to operate with discipline and efficiency. While we are focused on investing in our apps to bring our brands to market around the world, we are also managing incremental spending and headcount carefully, and we remain committed to expanding margins for this fiscal year and beyond. Total GAAP costs and expenses were $239 million for the quarter. On a non-GAAP basis, excluding stock-based compensation and other non-cash or one-time items, our total non-GAAP costs and expenses $193 million, up 17%. Cost of revenue was $76 million and grew 25%. As a percentage of revenue, cost of revenue was 29% versus 28% in the year-ago period. We have now largely left our compliance with the Google Play Store mandate, which began in April 2022. Sales and marketing expenses grew 12% to $64 million. This represents 25% of revenue versus 26% in the year-ago period. We remain diligent in our allocation of marketing spend and continue to see opportunities for leverage, in particular from our brand marketing piece. G&A expenses were $29 million or 11% of revenue compared to $29 million or 13% of revenue last year. Product development expenses were $24 million or 9% of revenue versus $17 million or 8% in the year-ago period. Investment in product and technology is a critical driver of our growth, but we maintain a high bar for net headcount addition. Q2 gap net earnings were $9 million compared to net loss of $5 million in the year-ago period. Q2 adjusted EBITDA was $67 million, up 23% and above the high end of our outlook range. and represented a 26% adjusted EBITDA margin. Now turning to the balance sheet. Our cash position remained strong as we drove free cash flow of $40 million in Q2. We ended the quarter with a cash and cash equivalent balance of $381 million. Our total debt position was $623 million, of which just $6 million is due over the next 12 months. Our strong cash flow has enabled us to return excess capital to shareholders. Last quarter, we announced that our board authorized 150 million share repurchase program. And in Q2, we repurchased 1.3 million shares for a total of 21 million. Now moving on to our financial outlook for Q3 and full year 2023. We are pleased with the results we achieved in the first half of the year and remain confident in our ability to deliver within the previous full-year outlook ranges for revenue and adjusted EBITDA. For Q3, we expect the following. Total revenue between $274 million and $280 million, representing a growth rate of 19% at the midpoint of the range. We expect Bumble app revenue to be between $221 million and $225 million, representing a growth rate between 22% and 25%. Our Bumble app revenue outlook includes expectations for sequential net ads of approximately 140,000 to 150,000 in Q3. We are pleased with the turnaround we have seen with respect to Bidu in the past quarter. We expect Bidu sequential net ads to be slightly positive in Q3, similar to Q2 levels. We estimate adjusted EBITDA will be between 71 million and 73 million, representing 26% at the midpoint of the range. With the first half behind us, we are now narrowing our outlook for full year 2023. We estimate total Bumble Inc. revenue of between 1.055 billion and 1.072 billion, representing a growth rate of 17% to 19%. We expect Bumble app revenue to be between 852 million and 863 million, representing a growth rate between 23% and 24%. Our Bumble app revenue outlook includes expectations for full year net ads of approximately 510,000 to 525,000. For adjusted EBITDA, we maintain our expectation of at least 100 basis points of year-over-year margin expansion. In closing, we believe our business remains as strong as ever and we continue to see momentum across our app. The authentic focus on kind connections, which is a hallmark of our offerings, differentiates us in the marketplace and is demonstrated in our financial results. Our team is operating with discipline and purpose to deliver value for our users while capturing the tremendous opportunity that we envision for our brand. Thank you for your continued support. And with that operator, we can open it up for Q&A.
spk06: As a reminder, to ask a question, simply press star followed by the number one on your telephone keypad. And we'll pause for just a moment to compile the Q&A roster. Our first question will come from the line of Alexandra Steiger with Goldman Sachs.
spk01: Please go ahead. Great. Thank you for taking my questions. So maybe one for Whitney and one for Anu. Given your recent acquisition of Official and the launch of Bumble for Friends, could you dive a little deeper into your long-term vision of Bumble evolving into an ecosystem of love and what that could mean in terms of future payer growth, conversion opportunities, and retention dynamics? And then for Anu, I know it's too early to talk about 24, but how should we think about a normalized growth rate beyond 23? Thank you so much.
spk04: Yeah, hi. I'll start. Thank you so much for the question. So as we've said from day one, Bumble has always been about kind connections at large. We obviously put a huge focus on romantic relationships and dating. But when you look at a person's life of relationship, dating is just one part of that. And we really want to be there with someone on their entire relationship journey. And so if you really look at this relationship spectrum, We want to be with you not just when you meet your partner, but then as you go off of the dating app and you then have a new relationship, we want to stay with you through that whole journey. And when you look at these relationships from a romantic lens, we're just talking about official right now, they're cyclical. Most of these relationships in your 20s and your 30s and even beyond, they don't last forever always. And so we're with you when you find love and then as you build that relationship together, And then it really does turn into a cycle to come back into the dating ecosystem, whether that be Bumble or Badoo or... Excuse me, ladies and gentlemen.
spk06: This is the operator. I apologize, but there will be a slight delay in today's conference. Please hold, and the call will resume momentarily.
spk05: Hello, may I have your name, please?
Disclaimer