Bumble Inc. (BMBL) Earnings Call Transcript & Summary

So good morning, everyone. Thanks for joining us. My name is Alexa Steiger, I'm part of the U.S. Internet Research team at Goldman Sachs. I'm very pleased to have Whitney Wolfe Herd, CEO and Founder of Bumble and Anu Subramanian CFO of Bumble with us today. Good to see you again, and welcome to our conference.

Thank you. Thanks for having us here.

So before we start, I quickly want to read the safe harbor on behalf of Bumble. This presentation, including our comments and answers to questions may include 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 current -- and information currently available to us. Description of these factors and other risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our earnings press release dated August 8 and our filings with the SEC, including our annual report on 10-K -- Form 10-K for the year ended December 31 and our subsequent periodic filings. And with that, let me start with my first question to you, Whitney. You recently talked about how you want Bumble to become an ecosystem of love in the digital world. Can you remind the audience of your long-term vision for Bumble and what differentiates the platform versus other online dating assets?

Sure. So I think it's important to take people back to the beginning. I started Bumble not to be just a dating app. I wanted it to be a hub for people to find any relationship they were looking for. That's why the brand is so polite and kind and inclusive and warm. You won't see hearts all over the brand name. It was never meant to feel romantic but we had to prove ourselves in love. So since we've scaled over the last several years and have become a dominant one of the leads of romantic connections, the original vision kind of started taking shape by itself. So back in 2016, we rolled out Bumble for Friends as a mode inside the app. And what we realized over the last several years is that, that is a product that is as sticky as love, which anyone in consumer Internet understands how hard that is to do. Very few products on planet earth have the same engagement levels as a dating app or a very good dating app. So to see the stickiness and the retention of people just friend-finding predominantly women, it gave us real conviction to do something bigger and broader with that. And when you looked at 100 women -- convincing 100 women to join the dating app to then find the mode, find a friend. It's really tricky, right? So to see so many people that had actually used the dating app to essentially find friends while they were in relationships, this was kind of a crazy feet. So we said we're holding ourselves back by not having a stand-alone app. And that's where we really have rolled out now a friend-finding app. But when you zoom out and look at the broader ecosystem of love, we've started to prove ourselves in other categories. So why can't we have a dating app for couples, millions of people around the world, millions and millions and millions on that number is just going to grow, are trying to find their special someone using technology, but then they do find their special someone, why would you lose that customer? Why would you just send them into [indiscernible]? Why would you not retain that person and keep them in your brand orbit because we know that relationships are cyclical. So if we can then extend that LTV of the customer once they found love and we keep them on our app, which we just purchased called official, where we basically send the new couple, daily check-ins and reminders and we take the pulse check to see how the relationship is going. When they do break up because, unfortunately, a lot of relationships end, they then come back to the dating app. So our big goal is to be the relationship company. This is incredibly lucrative. This is something that has sensational demand and TAM that is absolutely global. People need love and they need community. So that's what we're building, and we see a really robust future around that.

A topic that is obviously very front of mind for a lot of investors in this room is artificial intelligence. How do you leverage artificial intelligence to unlock value within the Bumble ecosystem? And what are some of the areas you're most excited about for Artificial Intelligence?

So we've been using AI for years. It's fun to see it be on every billboard everywhere, but this is something we've been doing for a very long time. Our machine learning and our AI tools are how you match with people on our product. But what's so exciting about today's moment of AI is how Generative AI can only enhance and improve that and these LOMs out there to be able to plug into their data sets and to be able to improve who you see when you see them and then to be more suggestive about what you do with that person, like how do you engage and how do we suggest the date, how do we get you off the app quicker, better, safer, more efficiently. We've been using AI to be a leader in moderation and safety for a very long time. So we're very excited about several fronts across AI, I would say, first and foremost, is optimizing what we've already got, right? How do we help you select even better photos and write a better bio. How do we help you connect with people more relevantly and more -- in a more compatible way and then how do we actually guide you along the dating journey. It's fascinating if you were to look at most American singles, they don't want to be single but they don't date because they have no clue how. They say that. They are just scared. They have no idea how to date. So if we can leverage AI to actually teach you how to date, feel good about it along the way and then guide you through the entire journey. Beyond that, we're really excited about the optimization of just our spend, right? How can you find efficiencies across the business and to create more opportunities to take that capital that you find in either put it to the bottom line or to grow new markets. And so there's a lot to be done with AI, I think, in a couple of years from now, this should be one of the most interesting consumer cases of AI, and I'll tell you why. The majority of consumer tech will be disrupted in a way that is replacing the need for a human or replacing the need for connection. This is one of the only use cases where you actually enhance the human connection. So AI will actually play a significant role in making human-to-human relationships better, stronger, safer, more compatible. And so I think it's going to be a huge catalyst in our goal of really helping end loneliness, which AI is a huge threat to. So we're excited to leverage it for good.

So before diving a little deeper into the business itself and some of the current debates, and let me ask you one question just on like the broader environment right now. Given the volatility and discretionary consumer spending, what are your thoughts just generally on the consumer into the second half and also maybe into next year? Anything that would make you more or less constructive on current trends? And more specifically, how do you think about the potential impact from the resumption of student loan repayments on the business?

Yes. Sure. So I think from a -- over the last few years, right, we've seen different points in time where consumer spend has been threatened, right? I mean, right from when COVID happened to when the war started in Ukraine and the impact of that on people, especially in Europe, to obviously, over the last 12, 18 months, we've talked a lot about macro and what does spend look like. I think we've been -- what we've seen over the course of the last few years is our Bumble App consumer has continued to be resilient from a spend perspective, right? I think we've seen that in the growth that we've seen. We've seen that in the research and conversations we've had with our customers, which is they look at dating as something that is a necessity. They look at it as something that is a low price point that they don't have to cancel even if they're thinking about canceling other spend, right? And it is something that people are not just looking at discretionary spend, right? So I think we feel pretty good that past history has shown us that dating has continued to be resilient, especially for the Bumble App consumer. So we feel good about what that means for us in the coming quarters. I think specific to student loan spend, obviously, we'll keep a close eye on the numbers starting October to see if we see any impact. But right now, we feel good. And then on Badoo, we've talked about this a lot. I think historically, Badoo has been more hit from a macro perspective. Obviously, the student loan piece doesn't impact the Badoo customer as much. So we feel good about that. But overall, and we can talk more about Badoo today, Badoo is on a good path to stabilization. So we do feel like the Badoo customer is sort of coming out of the macro impact that they've been seeing over the last 3 years. So overall, we feel good about where things are. Obviously, we are obsessive about keeping an eye on trends and we'll update everyone as -- if we see any changes.

Great. Let's pivot to some of the key product initiatives you're working on. Whitney, maybe starting from a high-level perspective, what are the areas you're most focused on when it comes to product innovation and/or optimization?

Yes. So we like to work backwards from the most important thing, which is what our mission is and what we've always been driving towards. So we're really trying to help end loneliness by getting more people into healthy relationships. So I'm completely obsessed with reducing the time between match to meet, not match to chat. In a perfect world, the chat is redundant. Chat serves really nothing here. We don't want to be a chat room, we're not a messaging app. We want you to go online to get offline. And a lot of investors go, "Oh, God, but what about churn? But what people don't realize is churn is such a powerful tool for us. When you are in a bar and the bar top is a bunch of different Bumble meet-ups and matches the people around that hear that, and they download Bumble. So you might lose two people, but if they're wedding, they've integrated Bumble into their wedding speech. All the single grooms and the Bridesmaids are now on Bumble. So churn is a super, super charger for us, and it's been how we've grown from day 1. So our big goal is to, through a lot of product optimizations and candidly, lots of innovation, which we're hard at work on right now. To really reduce that time from match to meet. That means making your matches more relevant, more compatible, safer, more authenticated across the board and then really getting you out in the real world in the shortest amount of time making plans together, doing things together. You want to go for sushi tonight? you want to play pickleball this weekend, you want to go for a hike. Bumble should be the place that you do that. And we see that that's already happening. The consumer behavior is already there, but we don't really have the tools live in the app to really take that to the next level. So that's a huge focus. The second focus is with scale, making every experience feel more curated, more elevated, more personal even in a sea of potentially down the road hundreds of millions of people in the long term. How do we actually make you feel like you are where you're meant to be and your thing that people meant for you? So you've seen us launched the very, very first iteration of this, which I would say is still very V1, which is Best Bees. This is where our AI algorithm basically detects on a series of different data points why someone would be hyper compatible for you and they actually highlight them to someone you should engage with. So we did make that a monetization feature. The way we like to run product at Bumble is we don't really extrapolate something as, okay, this is to make money, and this is to add joy, everything is intertwined. We always work backwards from the customer. So how do we actually add joy and reduce friction in the experience and where is there an opportunity to make money along the way. So that has been a big driving part of the strategy from day 1 with our monetization. The next thing I would say we're really excited about is the higher-tier offerings. We believe that there are so many folks out there that would love to meet a special someone in a more serious intent -- with more serious intent, meaning not really just getting on to see what happens, but getting on to say, I'm looking for something serious. So really carving out that experience that provides serious dating through the lens of curation and relevance and more high touch points and AI can do this. So in the pre-AI days, the olden days, if you will, you have matchmakers, right? So how do we actually provide a very curated experience through our technology. And then the last thing I would say that we're extremely excited about right now is really proving out this ecosystem of love, right? We want you at any given moment to be using Bumble date, but also be using Bumble for friends. And we're seeing that overlap, happening every second at the company. And so really, proving that this is the place you go to meet people you don't know yet. We saw this wave over the last decade with Facebook. Facebook was kind of where you went, you kept in touch with people and then you got more varistic with the Instagrams and the TikTok of the world, but you're not meeting new people. That's not where you meet new people. So we want to be the central point of where you build your community, your network, you find your next relationship, all through the lens of our brand of empowerment, safety, kindness and doing things in a happier way, kinder way.

You briefly mentioned already some of the key features that just rolled out. I do want to dive into some of them a little deeper. Maybe let's start with complements. That feature is now fully rolled out and you recently disclosed that it's that you're seeing usage and revenue contribution ramping. How does complement add value to Bumble's current offering? And how should we think about the potential to add even more prematch experiences going forward?

So complement is, of course, in line with the Bumble brand, right? It's not just send a message. It's a complement. It really reinforces the spirit of Bumble, which is to treat each other with decency and respect and that is a unique selling point to us. The other thing about complements is we're the only scaled dating app where historically, prior to complement, only one gender could initiate conversations. So when you think about the barrier to entry there or even just the missed engagement, if you will, the missed interactions and the messages. This is really starting to bridge that gap. And we did that strategically. We waited until we had a an ecosystem that behaved well and was kind and did not have the stuff I really set out to fix, which was these apps were just rooted in abuse and harassment and toxicity. So we really laid that foundation and complement is a supercharger to the ecosystem. It's getting the conversation started. As I said, the goal is to shorten the time from match to meet, and this actually bypasses match. Right? So you might land in San Francisco and want to go grab a drink tonight, but you haven't had time, you can open your phone and historically, you would have had nothing because you would have had to make that first move. In this instance, someone could have complemented you and you may have liked what they said. And then you respond to that next thing you know 3 hours from now, you're grabbing a drink around the corner. And so this is really just supercharging that goal of getting people offline. And I think what you'll see us do in the coming iterations of complement that beyond, call it, the pre-match experience is really lean into exactly what I just said. How can we build upon that mechanism of messaging someone right away when they catch your attention and how can we use that as a model to invite someone to do something or to capture their attention in other engaging ways, which is also a another opportunity for us to further monetize. So overall, complements has been a win to the ecosystem, the customer and also showing really positive proof points monetization.

Best Bees, you just mentioned it. What drove the decision to add the feature to the premium subscription year versus as a stand-alone feature? And maybe Anu you, can you just help us frame the monetization impact?

Sure. So I think back to what Whitney just said, right? We don't -- when we launch a feature, the goal isn't always to say, this is for joy and this is for monetization, right? We want to always let the feature land, see how it works and then we decide what's the best place for it in the ecosystem. So originally, we had contemplated Best Bees as something that would be a consumable and today, you can -- you get four curated Best Bees every day. That's what you get. And we started to see really strong adoption, and we also started to see that Best Bee was becoming a strong entry point for non-payers to become paying subscribers, right? So we said, okay, there's something powerful here, and we want this to be a feature that a lot of people can get and derive value from. So we made the decision to move it into the subscription tier because now we've seen a lot of -- into the higher price tier, Bumble Premium, and we started to see more people adopting to it, obviously, which means it's exposing the feature to more people, but it's also leading to higher monetization as a result.

Lastly, I want to follow up on the new subscription tiers. So on your last earnings call, you talked about launching additional tiers, both at the high end and also the low end to drive payer conversion. Can you just give us a sense how these new subscription offerings will look like? What is the timing? And then how should we think about the potential monetization or revenue tailwind from those new subscriptions.

Or a high level. So very high level. It's really looking at the entire audience and saying, who here has the opportunity to pay? And what are they getting from this experience? And when you really start to look at the audience on a granular level, you start to realize that there's a lot of folks out there that are willing to pay. They have the funds to pay but maybe the current offerings are not delivering what they're looking for. For example, there are countless folks out there that would be willing to spend more than the cost of 2 drinks in any given city on a monthly basis. To find the love of their life. And so that's money that we feel is being left on the table if we don't build something that gives them that curated, personalized offering at a much higher price point. So that's our foray into the high tier. We can't double-click on how that will manifest yet because it's not public. But I will tell you, a super AI-driven as we discussed, kind of old matchmaker, if you were to digitize that, what would that look like? And how does that become very value additive to a customer and then on the low-tier offering, the lower tier, there are so many people out there that want to have the expanded feature set of expressing yourself more or engaging on a deeper level. But candidly, these are 19-year-olds, and they don't have $45 month to spend on a dating app when they actually do need to show up at the bar with their friends on a Thursday night and they have to save that money for there. So this is an opportunity for them to become a payer, it expands our payer base and it's really just more friendly to that stage of life. So the way we think about age bands at Bumble, it's less about generations, everyone spends a lot of time on GenZ, millennial, Gen X, Bablabah. This is really about life stage. Where are you in your journey? Because when you want to find someone to settle down with, you will do anything in the world to do that, right? And you'll spend more than $50. But when you're not looking for that, you're somewhere entirely different. And so this is really how we optimize, and we've talked a lot over the last earnings calls in these conferences about bundles, right? We have so many different offerings. How can we bundle them and really target different life stages with these different bundles of offerings.

I don't know if you want to follow up just on like how you think about the revenue tailwind from launching.

We've said we intend to start testing this by the end of the year. So I think for 2023, you shouldn't assume anything. But we are -- obviously, we are not talking about 2024 yet, but you'll hear us talk more about how that starts to impact revenue. We are excited. We want to get the product right. We want to make sure that the value that we are offering our users make sense. And we know that -- and historically, you've seen us do this. We take a more drawn out approach to how we launch new tiers. It's not going to be everything lands on day 1, and you see a hockey stick. I think it will be more gradual, but we are very excited about what this means for us to drive more payers and drive our people as well.

One question that comes up a lot these days is how you think about pricing. So I don't know if you want to add like how you generally think about pricing and pricing certain products.

Yes. So for us, pricing is what we describe as an always-on approach, right? We tend to -- historically 2 years ago even, we had a one-size-fits-all approach to pricing. We've changed that over the course of the last 2 years. And now we're taking a much more pricing optimization route. And what effectively that means is at any point in time, our pricing teams are running elasticity tests on what -- how much value we can charge people. We're also looking at the value of our existing products, right? So we're not looking to increase prices just for the sake of increasing prices, we want to make sure that ultimately value is being offered to the consumer at whatever price point we are offering it at. So that might mean in the U.S., we may be testing variations in pricing based on geography, right? And that can sometimes manifest in our raising prices and that can also equally manifest in us lowering prices because we feel like we can increase payer penetration by dropping prices. And again, I wouldn't think of these as massive step change increases in prices. That's not how we are doing it. Now obviously, when we launch a new tier, you'll see that. But on a normal basis, these are much more, what I would call, optimization. And equally in the international side, and we did this in Q2 as well, where our payer penetration is much lower than where some of our more mature markets are we may say, you know what, maybe it makes sense to drop prices because you can immediately drive payers up, right? It's not a one-size-fits-all approach at all. And we are not remotely concerned about our ability to continue to drive our people in A market in the long run. The focus always is on making sure that at every price point, the right value is accruing to the user. That is ultimately the most important thing.

International [audience] is obviously a big part of the Bumble growth story. Over the past few quarters, you've made great progress in expanding Bumble's international footprint in markets like Europe, LATAM, Asia. That said, the U.S. obviously remains your largest market. How do you see that mix changing over time? And what is your highest priority right now in terms of expanding your international footprint?

Yes. So when we went public 2.5 years ago, we had said international is a big priority for us. The U.S. was our largest market at that time. And we've consistently, over the last 2 to 3 years shown and demonstrated that our app resonates with our international audience, and it works really well and payer penetration is growing and revenue is growing, right? So our strategy around how we think about international has not changed at all. It still continues to be a big focus for us. A different international markets are at different levels of market maturity as well as payer penetration maturity, right? So if you look at Western Europe, outside of the sort of core English-speaking markets, Western Europe has been a big priority for us over the last 12, 18 months. They are all now coming up to being sizable markets from a user base, monthly active user base perspective, and we've started to now drive payer penetration up in those markets. And then you have many markets in LATAM, in Asia where we are now heavily focused on just driving monthly active users up, right? Again, this is a premium app. It's a marketplace business. You need enough people on both sides of the equation for the market to work. So you are -- so you'll see us focus on driving the user base in some of the markets in LATAM and Asia. And then once they get to a certain size, we'll drive payer penetration. Back to the U.S. point, the U.S. is still the biggest market for us. It's still going to always be an area of focus for us. And even in Q2, and I know people talk a lot about -- our people is declining, is that an issue? Our focus is not on what happens to the our people at the company level as much because, to your point, the mix shift can change that. But at the country level, we've still seen increases in our people year-over-year in Q2 as an example, right? Because we know that we are able to increase prices as a result and net adds in Q2 sequentially grew in the U.S. as well. So again, even in the U.S., which is our biggest market, our focus continues to be on driving payers, driving pricing where it makes sense. And we have a lot of Tier 2, Tier 3 cities where awareness for the app is still low, right? And we still have a lot more work to do in those markets. So our marketing teams, our task is making sure that Bumble becomes the #1 brand in a lot of those markets as well. So I would just say that the runway for growth in both the U.S. and the international is still substantial. We just have to make sure we go get that growth.

Great. So we talked about international. We talked about some of your key products. Taking all of this together, how should this translate into user growth and revenue growth for the rest of this year and maybe even beyond 2030.

So again, at the risk of sort of repeating myself, the way we think about our growth vectors are very simple, right? We -- we are a premium app, which means we need to make sure that our monthly active user base is always growing. Our top of the funnel is growing in every market that we're in. We have to make sure that we convert a portion of them into becoming paying users and then we have to make sure that we offer the right products so that we charge them something for it, right? So that's the simple equation. We always focus on maximizing revenue. We've always said that. The good news is we have a ton of room to continue to drive payers. So that obviously is a focus area for us. We like to talk a lot about the sort of new product initiatives, but a lot of our growth actually comes from always on optimization under the hood stuff that most people wouldn't ever see. Small tweaks in how we either work on our algorithm, how we change a button from point A to point B can often lead to big changes in driving payers up. So that, I think, will be something that you'll see us do through the rest of this year as well as next year as well. And then we look at some of these new product initiatives and we say, okay, how much do we believe complements can contribute to a quarter or 2 a year this year, best be so on and so forth. Some experiments have landed, have tested and we have much more confidence in them. Some are much more into the future. So we take a more sort of probabilistic approach to how much we think each of them will contribute. But again, I think our philosophy on how we think about revenue is not going to be different next year. It will be continue to grow users, continue to drive payers, and then optimize on our people where applicable. I think those three things you'll see us talk about over and over again.

I also want to spend some time on the new BFF experience, which recently launched as a new stand-alone app. Can you maybe just walk us through how the new experience look like? And how should we think about the potential to monetize that in the long term versus your obviously, your focus on growing adoption in the near term?

Yes, BFF Stands for Bumble For Friends. It's now a stand-alone app. It is also a mode inside of Bumble app. The way it is today, we're doing a staged rollout. So we basically rolled it out as close to the core experience in the dating app as it was with the exception of [adding] Group, so you can form groups of people. But what we're really focused on over the coming months and near-term quarters, is making it more of a community-based product. So we understand very clearly that people are looking to form community. It's very different than dating. It's not so one-to-one. When you're dating, generally speaking, you're looking for one person, right? And with friendship, you might want to go out on a hike with six people. You might want to go out to the bar with multiple people. And so it's a different experience. And so you'll see that gradually start to roll out here. From a monetization standpoint, friend finding is inherently different than dating from a monetization journey standpoint. So this is where you will see us in '24 once the ecosystem is to a place that we're very comfortable with monetization was never our primary focus for Bumble For Friends that was building the core experience and the ecosystem and getting that right. And then we will really start to lean into building out an ad model and building out this partnership model. We have a very lucrative audience for some of the most interesting brand and strategic advertising partners that are out there. Not to mention, there's a lot of shared subscription opportunities, right? You might be someone on the dating app who also want access to supercharge experience on the Friend finding app. So we will be really exploring all of the usual suspects when it comes to monetization. So consumable subscription, advertising, partnerships and I would say, really focused more about how it builds out that LTV journey and how it reinforces the brand and the mode of Bumble as an ecosystem of relationships and the monetization will be coming down the road.

Before turning to margins and expenses, if we have time, actually, I quickly want to touch on Badoo. So after 2 years of negative year-over-year growth of Badoo, we just saw the app inflecting into positive growth territory, grain. Can you just talk about some of the initiatives you're focused on to accelerate growth from here, both on the payer and are people [indiscernible]...

So the most important thing I can say about Badoo is historically, we were not giving it a dedicated leadership. So now once we rolled out dedicated leadership team, where they woke up every morning and all they thought about Badoo. All they did was problem solve the challenges that the Badoo customer was having and they really rebuilt the experience from an algorithm standpoint and from a product standpoint for what that customer was looking for. And that has paid off phenomenally well in terms of the short-term turnaround story that we're seeing. What you'll see in the future is really focusing on this north star of getting every single Badoo customer, a quality match every time they come to the app. That is what the teams are optimizing for. If we can deliver on that, you can deliver a flywheel, which then turns into positive growth more broadly and really focusing on optimizing the brand. So you'll see really kind of this full approach of a relaunch, if you will, the brand, the product offerings, the customer focus. And we've got great leadership of Badoo. So we're feeling positive about the longer-term Badoo story.

Great. So just in the interest of time, maybe skip the margin question and just move on to your predictions, right? So what are you most excited about with respect to Bumble over, let's say, a 1-, 3-year and 5-year time horizon?

Yes. I mean the world is lonely and sad and disconnected. And social media and technology is actually one of the biggest drivers of that. And so I think we have a very unique opportunity right here right now with the brand we've built with the user base we've built with the flywheel we built around the world to really capture even more customers through more engaging features. We're obsessed with five priorities right now, optimized product, AI, customer brand and growth. That's all we care about and so I think what you'll see is we will really try to solidify our [ stance ] as being much more than just a dating app. I don't think we've gotten enough credit for that yet, and we will over the coming quarters. So really, the global place for people to find whoever they're looking for, starting online to then get offline.

Perfect. Well, thank you so much for joining us. Thanks.

Thank you. Thanks for having us.