Bumble Inc. (NASDAQ:BMBL) Q1 2024 Earnings Call Transcript May 8, 2024
Bumble Inc. isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).
Operator: Hello, and welcome to the Bumble First Quarter 2024 Financial Results Conference Call. My name is Elliot, and I’ll be coordinating your call today. [Operator Instructions]. I would now like to hand over to Cherryl Valenzuela, VP of Investor Relations. The floor is yours. Please go ahead.
Cherryl Valenzuela: Thank you for joining us to discuss Bumble’s First Quarter 2024 Financial Results. With me today are Lidiane Jones, CEO; and Anu Subramanian, CFO of Bumble. Before we begin, I’d like to remind everyone that certain statements made on this call today are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call. Descriptions of factors and risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our earnings press release and filings with the SEC, including our annual report on Form 10-K for the year ended December 31, 2023, and our subsequent periodic filings.
During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today’s earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. And with that, I’ll turn it over to Lidiane.
Lidiane Jones: Thank you, Cherryl, and good afternoon, everyone. We have had a very productive start to 2024. Bumble is where women make the first move, and it continues today. As I complete my first 100 days as Bumble CEO, I’m even more energized by Bumble’s unique position to help the world create healthy and equitable connections throughout people’s lives, focused on women’s experiences. That’s what Bumble has always been about and our mission, coupled with our product-led approach to meeting customers where they are, makes Bumble more relevant than ever. We kicked off the year with discipline and speed and delivered solid Q1 performance while also executing on our exciting plans for Bumble app. We launched the first stage of this journey last week.
I’ve been very impressed with our team’s energy and pace of innovation and there’s a lot more to come over the course of the year. I will detail what’s new with a Bumble app in a moment. But first, let me recap the financial results. Our first quarter performance was solid across our key metrics. Total revenue in Q1 reached $268 million, up 10% year-over-year, driven by Bumble App revenue of $216 million, which was up 11%. Both Bumble and Badoo App grew paying users year-over-year and sequentially with Bumble App net adds of 42,000 in this quarter. Based on third-party data, Bumble App’s worldwide downloads on an absolute basis through year-over-year and sequentially in Q1. We also continue to expand our global download share fueled by international markets in Western Europe and Latin America.
These results, combined with continued financial discipline, enabled us to deliver a significant improvement in our margin. Adjusted EBITDA in Q1 reached $74 million or 28% of revenue. We also returned $84 million of capital to our shareholders throughout our stock repurchase program. Since joining Bumble, I have prioritized listening to our community, including our Gen Z customers. These conversations confirm a thesis core to Bumble that an overwhelming majority of women view equality as a core priority in relationship. We have also learned that how women define equality is evolving. Women want choice and autonomy. And with Gen Z, in particular, they want to make a more human connections in their lives, whether it’s dating or friendship, and they want flexibility in how they make their connection.
We believe addressing these needs is how we unlock growth in this category, and it validates our long-term view of where we’re taking Bumble, including how we think of the role of BFF. All of the feedback we have received from our customers reaffirm that Bumble has a strong foundation in place to deliver on what customers want today. That brings us to our Bumble App relaunch last week, where we showcased the first chapter of our extended vision for Bumble and how we’re innovating to make our customers’ dating experience even better. Our refreshed brand identity and new product features are designed to support 3 goals; improve the core experience of our customers, enhance trust and safety and increase our options for monetization. Let me touch on each.
First, we’re improving the core user experience, starting with opening moves. We have expanded upon our signature make the Fruitz move by introducing choice in how connections made. Women can choose to make the first move as always. And now they can choose to have a question set that their matches can respond to, creating a new way to engage with connections while retaining control. I want to be clear, women still make the first move at Bumble. They now have additional control over how that happens, and we’ll continue to emphasize that with our customers. In addition to opening moves, we launched a suite of new features an improved profile creation flow to make it easier for customers to get started, an increase in the minimum number of required photos to enhance self-expression.
Advancements to For You algorithm previously called Best Bees to accelerate compatible discoveries and updated our dating intention badges to help our customers better communicate what relationships they’re looking for from casual all the way to serious. We complemented this richer product experience with a global marketing campaign, “We’ve changed so you don’t have to.” The first phase of this campaign showcases how our product updates deliver a better dating experience while underscoring that Bumble has always and will always stand for women. “We’ve changed so you don’t have to” is underway in 15 markets, including the U.S. This robust marketing campaign tapping multiple channels and activate Bumble’s large college ambassador network and global influencer marketing.
Second, we’re embracing trust and safety for women in the app. This quarter, we advanced photo verification on Bumble with significant updates to our own developed computer vision model for likeness comparison between someone’s verification photo and profile photos. As a result, we have improved automation rates at both the user and the photo level while maintaining precision and reducing our manual moderation cost. It’s important to know that as we continue to innovate, trust and safety features will be a big part of future chapters of Bumble’s evolution, and it is a key part of prioritizing a healthy ecosystem in our products. Finally, we’re expanding monetization with our updated Premium+ subscription tier. We continue to have conviction that our subscription tiers are designed to bring value to our customers by offering them the fastest path to finding their matches.
Premium+ is built on this principle, and we increased its value in this release by updating the feature set with personalized photo insights and better match curation. We see Premium+ as a valuable future revenue stream and expect to continue to add additional features and optimize pricing for the subscription tier. Beyond Premium+, we’re continuing to run global pricing optimization and expanding further into existing growth markets in Western Europe, LatAm and Asia. Overall, the Bumble app launch feedback from customers has been tremendously valuable to us. We captured the attention of young users who loved our marketing campaign and are taking time to share their thoughts and what they would like to see us do next. It’s clear that customers of all Asia want Bumble to be the brand that they trust, to really understand and meet their needs.
Based on early data from last week, we have seen strong improvements in engagement trends, including an increase in chat initiation with almost half of new users adopting opening moves, and most importantly, an increase in users getting matches. This has been an encouraging start. Now turning to our other apps, Badoo delivered positive revenue growth in Q1. We plan to continue building on this momentum with product innovation and targeted marketing campaign aimed at improving brand awareness, especially among women. Our goal is to showcase Badoo as the app that builds dating confidence enabling its loyal user base to express and do their real self in a safe and trusted environment. Our team is also focused on unlocking the significant market opportunity beyond dating.
We increasingly envision Bumble BFF as an integrated part of how we help our customers by meaningful relationships in love. And as I noted earlier that vision is supported by the community feedback we’ve received as part of the Bumble App relaunch. Given the loneliness epidemic in society, there’s significant demand for a safe space online for more genuine human connection and Bumble has the potential to fulfill that need. We are actively looking at ways to accelerate the road map for Bumble BFF and we’ll share more in the coming months. As we drive our future roadmap, it’s been exciting to see our team’s enthusiasm to integrate AI into our offerings in important ways. Bumble has incredibly strong data, AI capabilities and technical talent in the company today.
And since the start of the year, we’re more rapidly embracing the advancement of generative AI to accelerate innovation focusing on compatibility, profile creation experiences, better understanding our customers’ evolving intent and continuing to lead in trust and safety. We’re also targeting the use of generative AI to drive efficiency both for Bumble and for our customers with enhanced customer service as one key example. I also want to speak to our organizational transformation. We’ve made some difficult but important structural changes to enhance our agility and efficiency. And I couldn’t be more proud of how our employees have embraced the course for charting as a company. I’m also excited about the significant senior leadership talent who have joined us in critical areas such as product, engineering, operations and people, all of whom bring excellent track records and high-growth tech companies.
Our organization is moving forward as a performance-focused team that brings the collective skills and experiences needed to execute on our strategy and scale the business. The first four months of this year demonstrate that we have come together well and executing effectively. I’m also grateful for the team for staying committed to our mission and values and for rallying around important work we’re doing to champion women, not just in our apps, but in society more broadly. This quarter, we proudly joined 19 prominent business peers from a range of industry to participate in the “Don’t Ban Equality” coalition’s latest ad campaign in support of reproductive health care. We are also celebrating the introduction of a U.S. federal bill to fight cyberflashing, a cause that we have backed successfully for years at the state level.
I’m also proud of the Bumble’s support of women athletes in the U.S., and it was a joy to watch Cameron Brink, one of Bumble’s sponsored student athletes be selected in the WNBA Draft to play at the LA parks. Cameron, the entire Bumble team love watching you play, and we are cheering for you. Finally, I want to thank our shareholders, our partners and above all, all of our customers for the trust and support you’ve given Bumble. It’s been amazing to see what we can accomplish in such a short amount of time. I’m filled with gratitude, enthusiasm and confidence about where we’re going and what we can achieve. And with that, I’ll turn it over to Anu for details on our financial results and outlook.
Anuradha Subramanian: Thank you, Lidiane, and good afternoon, everyone. I’ll walk you through our first quarter results and then share more about our outlook for the second quarter and full year 2024. Unless stated otherwise, all comparisons are on a year-over-year basis. Total Bumble Inc. revenue in Q1 increased 10% to $268 million, in line with the high end of our outlook. Total paying users increased 16% to 4 million, and ARPPU for the quarter was $21.84, down 4%. Revenue from Bumble App increased 11% to $216 million, exceeding the high end of our outlook. The revenue growth was driven by growth in paying users, which increased 18% to 2.7 million. On a sequential basis, we added 42,000 paying users slightly above our expectations.
Bumble App’s ARPPU declined 6% to $26.34, primarily due to geographic mix shift. We continue to see year-over-year ARPPU improvement within many of our individual markets, including the U.S., driven by pricing optimization. Badoo App and Other revenue grew 7% to $52 million. Q1 marks 4 consecutive quarters of year-over-year positive revenue growth for Badoo, an exciting milestone in the turnaround of this brand. Badoo App and Other paying users grew 13% to 1.3 million and increased 13,000 sequentially. Badoo App and Other ARPPU declined 1% to $12.35. As a reminder, we began including contributions from Fruitz in Badoo App and Other KPIs in Q4 2023. Turning now to expenses. Consistent with previous quarters, we’ve remained diligent in our spend across all areas of the business while continuing to drive revenue growth.
Total GAAP costs and expenses were $219 million for the quarter, down 6% year-over-year and Q1 net earnings were $34 million compared to a loss of $2 million in the year ago period. The decline in cost was largely driven by a decrease in stock-based compensation expense related to headcount reduction, partially offset by onetime severance and related charges of $17 million. On a non-GAAP basis, excluding stock-based compensation and other noncash or nonrecurring items, Total cost and expenses were $194 million, up 5%. Q1 adjusted EBITDA was $74 million, representing a margin of 28%, exceeding the high end of our outlook. Cost of revenue was $80 million and grew 15%. As a percentage of revenue, cost of revenue was 30% versus 29% in the year ago period, in line with our expectations.
We expect cost of revenue to remain stable as a percentage of revenue for the rest of the year. Selling and marketing expenses grew 6% to $63 million. This represents 24% of revenue versus 25% in the year ago period. Our spend was lower than anticipated due to timing of certain marketing campaigns that moved from Q1 to Q2 to better align with the Bumble App product relaunch. G&A expenses were $28 million or 10% of revenue compared to $32 million or 13% of revenue last year. We continue to drive leverage in this line item as revenues have scaled. Product development expenses were flat year-over-year at $23 million and 9% of revenue. We ended the quarter with $263 million in cash and cash equivalents. During the first quarter, we repurchased $84 million worth of shares, including $50 million repurchased directly from Blackstone.
At the end of Q1, we had $59 million remaining in our authorization, and today, we announced an incremental authorization of $150 million, bringing the total buyback authorized to date to $450 million. We remain committed to our buyback program, and we strongly believe that using our capital to buy back shares at current levels remains a very good investment. Now moving on to our outlook. As we look ahead to Q2 and the rest of the year, we are very excited about the first phase of Bumble App’s relaunch that we unveiled last week. And as Lidiane mentioned, this is just the beginning of several future chapters to come. Our outlook, consistent with expectations we shared on our prior earnings call assume that current trends will continue in Q2 for Bumble App and that the benefits of improved trends from the app relaunch, along with the release of additional features, will reaccelerate growth in the second half of 2024.
As a result, for Q2, we expect total revenue between $269 million and $275 million representing a year-over-year growth rate between 4% to 6%. Adjusted for FX headwinds, this represents a year-over-year growth rate of 6% to 8%. We expect Bumble app revenue to be between $218 million and $222 million, representing a year-over-year growth rate between 5% and 7%. Adjusted for FX, this represents a year-over-year growth rate of 7% to 8%. We expect Bumble App sequential net adds of approximately 70,000 to 80,000 in Q2. We estimate adjusted EBITDA will be between $69 million and $73 million, representing 26% margin at the midpoint of the range. As previously mentioned, we delayed certain marketing campaigns from Q1 to Q2, which will result in additional marketing spend this quarter.
Our expectations for total marketing spend for the year remains unchanged. For full year 2024, we expect total Bumble Inc. revenue growth rate of 8% to 11%. We expect Bumble App revenue to grow between 9% to 11% year-over-year. We maintain our expectations for full year Bumble App net adds of approximately 350,000 to 400,000. We note that FX trends have become more unfavorable since our previous outlook and at current levels, we expect an incremental headwind to revenue of at least 50 basis points. We also maintain our outlook for adjusted EBITDA margin expansion of at least 300 basis points year-over-year. This includes the impact of in-year savings from our workforce reduction, which is expected to conclude in early Q3, in line with our prior expectations.
We are on track to realize annualized OpEx savings of approximately $55 million, of which we will selectively reinvest $15 million to drive long-term growth. As a reminder, our adjusted EBITDA outlook excludes the impact of expected severance and other onetime charges related to our workforce transformation, which is now expected to be between $20 million and $22 million slightly below our previous estimate. In closing, the work we have done in Q1 to rightsize our team, strengthen our leadership bench and accelerate our pace of innovation provides us with a strong foundation to further leverage our powerful brand. We believe we are taking the right measures to accelerate our growth and capture the large opportunity in the global market for online dating and human connections more broadly.
We are confident in our path and ability to drive sustainable, profitable growth and substantial value for our shareholders. With that, I’ll turn it over to the operator for Q&A.
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