Bumble Inc. (BMBL) Earnings Call Transcript & Summary

Good morning, everyone. Welcome to Bumble Fireside Presentation. Before we get started, please reference the screen for the forward-looking statements. And with that, I'll turn it over to Brad Erickson from RBC. Thanks, Brad.

Yes. Thanks, Brinlea. Good morning, everyone. My name is Brad Erikson I cover Internet here at RBC. Very pleased, as Brinlea said to have the manage from Bumble with us this morning. Founder and CEO, Whitney Wolfe Herd; and CFO, Anu Subramanian. So Whitney, Anu nice to see you both. How are things?

Great to see you. Thanks for having us.

[indiscernible]

Yes. Absolutely. So we'll just kind of dive right in. Why don't we start -- I think a lot of questions we've been getting since the earnings report, might as well go right to the controversy. Talk about, obviously, good results overall. But I think the payer growth was obviously a little bit of a controversial point for certain investors. You talked about that metric getting back to growth, and I believe both sequentially as well as on a year-over-year basis. Talk about sort of what we should expect, what's driving that? And then potentially also, what we think about that metric as we head into '22?

Yes. Great. So I'll set the stage on this one. I think it's important to lead by saying that we are very confident that paying users will meaningfully increase in Q4 and 2022, and that's both on Bumble and Badoo. So to understand why we're confident in this before we get into Q3, I think by laying some context on how we approach monetization is helpful, and we'll provide some clarity. So first and foremost, we're in the very early stages of growth, and we have multiple opportunities to grow our paying users, multiple opportunities. So our paying user growth strategy is really anchored in this idea that we can make the experience better for everyone by adding these additional value-added features. And then we also want to do this in a way that gives us very high quality, right, sustainable revenue growth. but that also really benefits the ecosystem. That's how you keep this company driving for decades. So our goal is to really grow revenue while preserving that strong ecosystem that I'm talking about and that overall user experience on Bumble app. So as a result, our initial focus with this 2-tier has really been about serving our most engaged customers through these premium offerings, and that's taking our historic consumables and bundling them into subscriptions. So this has resulted in both payer penetration increases, but critically substantial improvements in average revenue per paying user, while leaving our customers more engaged. And that's seen as an example, by our customer retention and good chats improvement, upwards of 70% of payers are opting for that higher tier, which is a really great sign of the value that's being provided. And that is absolutely critical. So to reinforce, this is experience enhancing, not diminishing. And that is absolutely critical for a healthy ecosystem. So this is just our starting point for unlocking more paying user growth. Moving into 2022. So we're very focused on expanding these entry points with a next generation of consumable and lower tier bundles and subscriptions, more generally. So this is really going to help us expand that number, the overall number of people who choose to pay for the experience. So we're very focused on continuing to drive adoption of these premium products, which is why, to my very first point, you will see increased growth for net subs and payers in both Q4 by 2022. So with that, I'd love to kick it over to Anu to add any other additional notes.

Yes. And Brad, just to build on what Whitney said. The way to think about paying user growth for Q4 is this, right? So between Q2 and Q3, we added 60,000 paying users for Bumble. And the majority of Bumble app users are on iOS, but our Android paying users were in Q3 impacted a little bit by us turning off the third-party payment methods, which impacted one day subscriptions like we talked about. So as we think about Q4, we are expecting a substantial sequential improvement in paying users above the 60,000 net adds that we delivered in Q3. And the reason why we are very confident that we will deliver more than the 60,000 net adds in Q4 is for a few reasons, right? One, we expect to see a recovery from the impact of the payment change that we made on Android. We're seeing strong engagement across our product in both our core markets as well as in the newer markets we're [ launching ] in, both domestically as well as internationally. And we've already landed many of the product features that will lead to paid conversion improvements in Q4. So for example, we made some NAV changes to our user experience, which leads to an increase in subscribers, for example, that landed late in Q3, early Q4. So -- All of this gives us strong confidence on our view on paying users for Q4. And to 2022, I mean, I'm not commenting on guidance yet. But as Whitney noted, we have a number of initiatives in the pipeline that we believe will continue to drive payer growth.

Got it. Got it. And then just maybe a follow-up on the -- for Anu on the Google piece. When you say you're starting to recover those, are you saying you're effectively seeing those same users come back on? Or just because of the lower friction point, we'll call it, that you're seeing sort of good adoption there once again?

Yes. So we are seeing -- we've obviously turned the third-party payment mechanisms on, so we are seeing those payers come back. I think it's important to remember that the change that we made in Q3, the testing that we did for the part of Q3 was ARPPU [ neutral ], right? It was revenue neutral in the sense that we saw an impact on paying users but a lot of these paying users traded up into higher-tier subscriptions, which helped from an ARPPU perspective. But now we've seen all of those users come back, and so we feel very confident going into Q4.

Got it. Got it. Okay. And then let's shift to international because obviously, that's very much related here. When you think about -- not necessarily just the quarter, but as we look out 1, 2, 3 years, international is obviously probably the bigger grower we'll get to revenue in a second, but just from a user base and particularly Bumble, where are we at within the next, call it, 6 to 12 months versus the longer term in terms of countries you can go into, critical massive penetration, that type of thing?

Yes, sure. So I'll jump in on international. I think it's important to just reinforce that, as we've mentioned in the past, this is one of the absolute biggest priorities for Bumble app which is really truly taking our mission, our product, our brand and everything that we've been able to engineer in our core markets and taking that international. So we're very, very pleased to see that continued strong growth in many markets around the world. So just in the past year, we've significantly expanded beyond this core English-speaking market focus. So in Q3, we made significant progress in entering new markets in Lat Am. We had very successful launches supported by really great marketing campaigns in Mexico and Brazil, and this contributed to a 100% year-over-year user growth across that Lat Am region. And another point here that I'd like to just double-click on. I think early on in our growth story, people were concerned that this woman make the first move and put women in the driver seat brand sentiment and focused wouldn't translate globally. But we've been very bullish on the fact that women around the world essentially want the same things, right? It might look slightly different from one culture to another, but ultimately, all women globally want to be respected in their relationships. They want to have control over their relationships, and they want to find healthy and equitable relationships, whether that's romantic or otherwise. And this is now proven by our very, very strong results, really, globally. And what's fascinating is when you look at this equality index, it really doesn't matter where that scale falls, whether it's the Philippines or Germany, very different places in terms of traditional norms. We're seeing the same type of metrics come out of both markets, which just really reinforces the power of Bumble on an international scale. So let's look to the future and talk about some of these newer regions. So some of the newer regions such as the [ DACH ] region in Southeast Asia, these really have strong continued momentum. Triple-digit user growth in many, many markets. India continued its resilience as the market really slowly started to open up, and we saw strength in a lot of markets like Indonesia and the Philippines, there was a lot of robust growth in users, payers, revenue. So our ability to localize Bumble and the entire Bumble app experience for market nuances, this is a really strong key differentiator for us. In Q3, just as a quick example, we launched language badges and filters. So this localized, these interest badges in many of these different targeted international markets. So among the users who actually adopted the language badges, we saw an increase in matches and a higher tendency to have these good chats. And so this is just really something critical to us. And as we look to the future, huge huge focus here, 2022 is not just about, of course, continuing growth in our core markets, which we still feel there's tons of penetration to be had there. But really going and capturing the rest of the globe and really evangelizing this entire notion of women being in control of their dating experience.

Yes, yes, for sure. And then I guess just one follow-up there. When you think about the countries you're in today. And when I say in, obviously, U.S. English-speaking and then a handful of countries. How does that portion compare, say, just a number of countries or population-wise relative to where you feel like you're significantly under baked at this point? I think people -- one of the questions -- the reason I ask -- one of the questions we get a lot is people get the sort of expansion [indiscernible] internationally, but not always maybe a whole lot of detail in terms of quantifying that. Any help there would be great.

Yes. Absolutely. Anu, do you want to jump in on that? Or I'm happy to if you'd like me to.

Yes, sure. I think if you look at the breadth of expansion, right? The U.S. is still a large market for us. And so even though that is still a substantial portion of our revenue, we are still looking at expanding even within the U.S. in Tier 2, Tier 3 cities. So we still believe that we have tons of runway to grow in the U.S. And then in terms of international, again, I think we're really just scratching the surface in terms of how big we can get. And so even if you take markets like Germany, we are in the top few cities in Germany. But again, as you think about expanding the breadth of cities we can be in and also going much, much deeper into those markets, we think that we have lots of rooms to grow in the coming months and years.

Only other note I'd like to add, and I think this is a framework people can think about both with our core markets as well. The penetration is really low still. So I think when you -- historically, the last several years, have thought about these kind of mainstream dating apps, you've really thought about it from an 18, call it, 30, 35-year-old age group. And that's just not the case anymore. The case is truly that everyone across the age spectrum, generational spectrum, interest spectrum, is looking for relationships. And so the TAM is inherently growing in these markets as we progress. Also that's important to note that stigma has reduced, right? A few years ago, the entire dating market [ up ] less than perhaps our peers just given our brand, and the friendly nature of women going first. But most dating products have been up against the stigma, and COVID really helped to break that down, right? There is no longer stigma in finding connection digitally because it was essentially our only option for 2 years. And because of that, it has become so normalized -- and that, in and of itself, has increased TAM opportunity both in core markets, but also internationally.

Got it. Yes. That makes a ton of sense. And then I wanted to come back, Whitney, on one thing you mentioned just around stigma. And I think in places like India, right, where you -- you've seen really nice adoption, and as you mentioned, particularly on the women's side of the house. And so inherently, that has a network effect, right, and sort of hopefully attracting more men to the platform. How do you build awareness around that? Because I feel like you're probably going to get some dynamic of that as you go into some of these new international markets. But talk about how you sort of ramp that up over time. Clearly, that's a tailwind for the marketplace. But just talk about that if you could.

Yes, sure. So I hope I understood your question. So I'm going to answer it as I understood it, and if I didn't, we'll clarify. So basically, we have a very strong USD, right? Women making the first move is something that is resonant with women, really, globally. And it's so different from so many market norms. And I'm not just talking about dating apps, right? I'm not just talking about technology. So you have these 2 kind of key factors working in our favor as we go international. One, society, in general, right, has told all of these women to sit back and to not go first and to be approached. Therefore, they have also told women to be essentially comfortable with being harassed and abused and treated poorly, both online or in their offline relationships. And these are 2 things that women hate, right, inherently. So we really take those 2 core emotions, and we use our strategy that we've used so successfully in our core markets by seeding the product and really seeding the marketing strategy. We go in really culturally nuanced. So just a quick example, when we went to India, we launched in India with Priyanka Chopra. She is, hands down, most certainly at that time a couple of years ago, the most important woman for women in India, or one of. So when you take the nuances of the culture, when you keep that USP so engaged, you have this opportunity to just have explosive growth in these markets. This is something we replicate. Who is the Priyanka Chopra of the Philippines, and vice versa. And this is something that we've really been able to go and successfully see it. And then we use all of our core product enhancements like I just discussed, or marketing tactics, which we are top of the game with marketing. And we really just expanded in the community. But to your point, there is a network effect here, right? The fact that Bumble app is inherently 80% organic even as it scales and, really, wherever you take it. Obviously, that depends on the life cycle, but that is the power of this company and the brand and what we're serving to women globally.

Got it. That's great. Yes. And I think along the lines of competition too, I was just curious on the views of competitive differentiation, right? You guys are going into these markets. And bringing a different value prop, a likely different composition of the marketplace. And so I was just curious if there was any sort of evidence to support that in your early views on some of these newer international markets?

Absolutely. I mean, the evidence is the fact that the growth rate is so high and that women are so happy with the experience. And that historically is contrary to dating in a lot of these markets, right? Women are generally unhappy with the experience. So the fact that we've continuously outpaced a lot of our metrics with women versus men, this is an industry first. This is -- this is categorically unheard of when you think about the power of retaining a woman customer, engaging a woman customer and actually having a paying woman customer, right? That's just a testament to what this product does for them. And when you keep the women experience so strong and healthy, it's inherent that the men follow. And so this is really kind of the key to launching and then scaling.

Got it. Got it. And then -- So let's back up just on a kind of an industry question. One of the other topics that comes up is because of the sort of lack of total active user disclosures in the space, people often ask, wonder sort of what's happening at the broader market rate. We can talk about payer penetration a bit. But when you think about things like marriage and divorce rates, I guess, career mobility, what else. Urban concentration, mix of where people are living. What do you think is happening in terms of like overall active user base in the space these days in online dating?

Yes. Why don't I start, and then Whitney, you can jump in. I think the -- I think the important thing to understand is that there have been a ton of secular changes and drivers that have changed the concept of online dating, right? There is a -- the most fundamental human need that we talk about and Whitney talks about a lot, is just relationships and love. And it doesn't matter who they are or where they are, that is a fundamental need that is just not ever going to go away. And pre-COVID, we already saw many, many secular drivers for online dating. But I think COVID, in many ways, has massively accelerated a lot of those drivers, going back to the stigma that we were talking about. But just the growing adoption of technology, younger generations being more receptive to online dating, I think are huge opportunities for us as we think about that TAM continuing to expand. And then I think that's especially important as we think about us growing -- going deeper into different generations, right? Not -- we're not just focused on the core 18 to 34 anymore as we think about the older generation, people that are divorced, et cetera, et cetera, I think that significantly expands the TAM opportunity as well. Whitney, do you want to add to that?

Yes. I think Anu summarized it really nicely. But broadly speaking, we are really pleased with what the outcome of COVID has been for the overall dating landscape. Obviously, we would have never wished this scenario on anybody or ourselves. But what it has done, there's a silver lining that's been exposed, which is humans have become the loneliest they've been in the last 2 years, and it has really shined the light on what we've been saying for 7 years, which is connection, relationships and having a healthy and good relationship is truly the foundation of any human's happiness. And it's so, so critical to existence on a global level, right? This is not something that is just important here or there. And I think COVID has both exposed that reality, but then it's really changed technology adoption overall, right? As I said earlier, I kind of answered this in another question, which was stigma was a headwind going into COVID. It was a headwind. You had a lot of folks that said, my God, I love Bumble, what a cool brand, but like, I don't want to be on a dating app. And that has gone out the door for the most part. And to see that willingness in the normalcy, I would say, I think the word normalcy is really important here, is that COVID has normalized online dating, right? It is no longer the I don't want to be on a dating app mindset. So that's been really fascinating. And not only that, but the way people will engage with the technology. So what's fascinating is if you look at the landscape of video when it pertains to dating before COVID, this was a different -- this was a totally different game. People really weren't leaning into this. They didn't really understand the benefit of it or why they would use this. They just assumed I'll just go meet whoever at the coffee shop. But COVID slowed everyone down. And now we're hearing from our women customers, and this is fascinating, saying, well, I can -- I am double vaccinated and that. I'm COVID-negative, I can go to the coffee shop to meet this person. But before I do it, I am actually going to do 1, 2 or 3 video talks through Bumble with this person to make sure that, A, this is someone I actually want to meet, that we have chemistry and that it's worth my time to leave the house and put in the effort to go and do that. So that is a categorical change and shift. And that's really important to pay attention to because it just reinforces the power of technology, and it shows you that even when you have a community that is open, right, people are back out, they are still relying on us and leveraging us in order to feel comfortable to go back out and meet people. So we're almost the bridge between going out there and meeting folks because it's easier, safer, more reliable, and you get so much more information from our profiles, right? You meeting someone in the bar or coffee shop, all you see is what you see. But with us, we give you so much context. You get multiple photos. You know they're verified and they have really kind of fallen in love with dating again, right, on this -- on this global level. In fact, we just launched a new campaign that is quite literally called Fall in Love with Dating, which just shows this whole notion of really falling back in love with getting out there and meeting people and using our product as catalyst to do that. So we're very pleased with the momentum that COVID has essentially provided to us for the future and a post-COVID world.

Yes. No, that's great. Anu, let's talk pricing for a minute. I think a year ago or so, you went 2-tier with Bumble, which I think has been a pretty big success. You're starting to roll that out with -- or you just started rolling that out with Badoo. I mean, I guess, we'll take the brands one by one. So start with Bumble, if you could. Where are we headed from a pricing standpoint, both on an a la carte basis and then subscription and then we'll move to Badoo, if that's all right?

Yes, sure. So on Bumble app, and Whitney briefly touched on this earlier, the launch of the 2-tier strategy was very much in keeping with our overall monetization philosophy of moving more people into the subscription tiers, right? And that's what you saw play out when we launched 2-tier on Bumble in Q3, we saw a 16% year-over-year increase in our people. Our adoption rates for Bumble at the higher price tier continue to be in the 70%, 75% range among the users that have been exposed to it. And as newer cohorts are coming in, that production rate is staying very strong and consistent, right? So we've been very pleased with sort of almost the beginning of what we call a long monetization journey. We've continued to -- in addition to doing the work that we're doing around 2-tier, we've continued to do pricing optimizations between -- in different markets and different geos, right, as part of this work as well. And you will see us continue to review prices in different markets. Our goal is to make sure we are competitive in every market that we are in and we recognize that our market nuance is, as we think about pricing, so that's something that we are laser-focused on and something you'll hear us talk about quite a bit in the coming quarters. And then finally, the work that we are doing around consumables. I briefly, during our earnings call, touched on extended spotlight, which has been a great consumable for us. We are also planning to launch a few other consumables by the end of Q4, early Q1, which, again, I think you'll see will be a strong driver as we think about improving payer conversion as well as our people. So we are very, very excited about all the things that we have planned. Our pricing and revenue teams have been hard at work on this for months. And we have an amazing cadence that we have of testing and [ iterating ] across the many markets that we're in, right? So we are very, very sophisticated in terms of how we do this, and we're super excited about that. Turning to Badoo. Like you said, we've just recently launched our second year subscription product, it's called Badoo Premium Plus late in Q3. So as we get into Q4 and Q1, you'll start to see benefits coming out of that. The overall revenue philosophy on Badoo is very similar to Bumble. In fact, 2-tier for Badoo also includes us moving certain consumables that we have today into the higher-priced tier. On Badoo today, we have a lot more consumables than we have on Bumble. That's partly a function of the geos that Badoo is prevalent in, where there is a higher propensity to pay for consumables. It's also a function of the demographic that Badoo operates in, right? Often, consumables at an entry point for people to start paying. And then that allows us to then upsell them into a subscription tier. So we are very, again, sophisticated in terms of how we think about it by market, and you'll see us continue to do a lot more work in terms of tweaking how we think about stand-alone consumables, consumables that fit as part of our largest subscription product. And so again, early days in terms of how we think about monetization and lots more to come.

Got it. And maybe just one quick follow-up. Is it possible to say that 2-tiering of Badoo might be able to drive price up, say, close to as much as you've seen with Bumble? Or should we not think about it like that?

Yes. You know, the difference, I would say, is on Badoo Premium Plus is really intended to be a higher-priced year that sits on top of the existing Badoo premium that we already have, right? So when we launched 2-tier on Bumble, we effectively duplicated the Bumble Boost into a lower price tier, and we increased Bumble Premium. We haven't done that. The existing tier for Badoo is still staying the same in terms of pricing, and we've effectively added this as an option for people that are spending a lot of money today on subscriptions as well as consumables. So we expect that from an adoption perspective, the adoption of Badoo Premium Plus just by definition because of how it's been engineered, will be lesser than the adoption for Bumble Premium. But from an [ ARPPU ] perspective, we've seen strong results in the test that we've done so far. So we continue to be excited about what that would mean in terms of ARPPU increases.

Got it. Okay. We're going to run a little over, but -- so we'll call this lightning round, but no conversation would be complete without a quick comment on the App Store stuff. First, to Anu, just puts and takes from the Google changes, obviously, in January, overall commission reductions. March doing away with third-party providers. And then Whitney follow-up for you, again, lighting round, quick comment on what the views are related to Apple? And what should we think about that at this point? So Anu, start with you?

Sure, yes. I mean I can try to touch on both and then I'll turn it over to Whitney, but -- We think that all the changes that have happened both from an Apple perspective as well as from a Google perspective, are obviously, very positive. We think of these as absolutely a step in the right direction in terms of where we see the App Store ecosystem go towards. I think with respect to Google specifically, the reduction of [ piece ] is obviously, again, a great step, especially in terms of what that might mean for what Apple might do. To your point, that our puts and takes between what the offset would be in terms of savings in the fees that we pay Google versus potentially what we might pay incrementally right now that Google would mandate Google Play billings, so we're obviously trying to work closely with Google on figuring that out. So more to come when we talk about this next quarter. And similarly, on Apple, a majority of our App Store fees today goes to Apple. And Bumble, as you know, is -- a large majority is Apple today. So we are excited about the direction of this. I think there's still a lot more detail that Apple has to give us in terms of what the Anti-Steering Provision will look like, how will that be enacted. We are very, very sophisticated in terms of using and enabling third-party payment platforms, right, on our Android ecosystem. And so to the extent that that's something like that was possible on Apple, I think, obviously, we'd be able to, from a technology perspective, deploy that in a pretty fast manner. But I think we still need some more clarity on what all of this means, how that would happen. So again, I would say we're watching all of this closely and more to come.

And Whitney, quick thoughts.

So listen, Apple is a great partner to us, and we are excited for any potential changes. I think Anu really summarized it, but we're eager and willing to work collaboratively with them in the future. And I think these changes if they do take place, you do the back of napkin math, it could be a very positive story, but definitely don't want to make any statements forward-looking as we don't have enough details of the moment.

Got it. That's great. Cool. Well, I think we're out of time. But Whitney and Anu, thank you both for being here, and look forward to catching up soon.

Thanks so much. Really appreciate it.

[indiscernible] Bye.

Have a great day, guys. Thanks. Bye-bye.