Bumble Inc. (BMBL) Earnings Call Transcript & Summary

All right. Good morning, everyone, and good afternoon to the folks on the East Coast. Today, I have Anu Subramaniam here with me from Bumble and I'm Chris Kuntarich, part of the U.S. Internet team. And before we get started here, I'm just going to read Bumble's safe harbor. So really quickly, this presentation includes Bumble's comments and answers to questions that may include forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect Bumble's current expectations based on their beliefs, assumptions, information currently available to them. A description of these risks and other factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in Bumble's earnings press release dated November 7, 2023, and their filings with the SEC, including their annual Form 10-K report for the year ending December 31, 2022, and their subsequent periodic filings. So with that out of the way, Anu, thank you very much for having me.

Thanks for having me.

Cool. Well, let's just jump right in. You've been CFO for Bumble now for just a little bit over 3 years. And other than Lidiane obviously joining, and we'll get to that in a minute. But I guess what has and hasn't changed the most since you started? And I guess what are you really most excited about at Bumble over the next year?

Yes, sure. So I think the fundamental thing that everyone joins Bumble for, including myself is our focus on our mission, right, which is to create healthy and equitable relationships for all through kind connections. That is the one singular thing that I have seen has not changed in the 10 years since Whitney founded Bumble and is certainly not something that is going to change in the foreseeable future. I think the company continues to be energized and excited about fulfilling that mission. And we spend a lot of time today talking about dating and romantic relationships because that's where our business is predominantly centered today. But if you extrapolate that into relationships through every walk of your life, whether it's platonic, whether it's friendships through your different life cycles, the opportunity is vast, right, which brings me to the second point that has not changed, which is our belief around how big this opportunity is. again, both in dating as well as in beyond dating. And our job, and we wake up every day across the company, every employee to fulfill the mission and to get more and more people into using our apps to find the connections that they want. And as I think about next year, I'm most excited for new and innovative technologies that are in the market now, and we'll talk more about AI and GenAI that can help fulfill that mission for us and help unlock a lot of pain points that exist for our customers, for our consumers. And the team is very excited to put all of that into motion as we go into next year.

Got it. And as we kind of think about the strategy from here, how should we think about kind of strategic implications associated with the CEO succession plan?

Sure. So I'm sure everyone knows by now, but we announced in -- about a month ago that Lidiane Jones will be joining us as our new CEO. She starts in Feb -- in Jan of next year, sorry. And I think the important thing to recognize is that the fundamental priorities of the business are going to be unchanged, right? If you all heard Whitney in the earnings call, she talks a lot about our priorities being customer AI/technology and brand. And those 3 are going to be the underpinning for our business for the long term. Obviously, Lidiane comes in with a deep background in product and technology. She has led large product and engineering teams. And so we're all very excited for her to come in and dig into the road map that we have for next year for her to enhance the processes we have in place, for her to sort of supercharge the pace of innovation that the company has had. And we've been very, very good from a product cadence perspective, rollout of new features perspective, right? So this is not about fixing something that is broken. This is about taking something that's already working really well and taking it to the next level. So I think that's where you'll see Lidiane spend a lot of time. And she's very, very focused back to my first point. She's very focused on the long-term mission of the company. So when she comes in, I expect that she'll be spending a lot of time talking to our users, talking to our customers, talking to the people in the company that touch various aspects of a customer's journey in making sure that we are fulfilling that value prop to the maximum possible extent.

Got it. Very helpful. And as we kind of think about, yes, high-level financial planning framework from here, how should we think about where Bumble is that in its journey on balancing user growth versus monetization versus profitability? Has there been really kind of an outsized focus on maybe like 1 or 2 of those legs of the stool here in the last year or so? And should we be seeing and thinking about any kind of real shift here over the next 12 months?

So the good news is, I think all of those levers still are very much in play as we think about growth for the foreseeable future. Even back to when we started as a public company, we had said we expect our growth vectors to be continuing to grow users, monetizing those users and then continuing to improve profitability, right? So we've been very consistent in being able to expand on all of these 3 vectors in the last 3 years. And you'll see a lot of similar things next year as well. We fundamentally believe that there are a lot more people that are yet to use dating apps than are using dating apps in the ecosystem today. So how do we continue to show up for them in a way that's most relevant, I think, is a big area of focus for us. At the end of the day, we are a 2-sided marketplace. We are a company that is about connecting people, right? So having a strong top of the funnel is critical to our success. We are also reaching pretty healthy user base sizes in a lot of our markets that we've been operating in now for a while. So how do you create features that drive payer penetration for those users is a constant area of focus. And a lot of the product features that we have, whether it's launch of some of our newer tiers, Best Bees complements, all of those are geared with an eye to ensuring that we continue to drive payer penetration. And then lastly, we've shown ourselves to be very efficient as a company. We're very disciplined from a cost perspective. And as we've scaled, we've seen operating leverage in the business. This year, we -- 2023, we committed to expanding EBITDA by 100 basis points. And our initial guide for next year has us expanding margin by 50 to 100 basis points. So you'll see us -- we want to continue -- we know there is a lot of top line growth to be had. So we want to make sure that we continue to invest in the business. But at the same time, we've always said we are publicly committed to also expanding margins.

Got it. And you kind of touched on it a bit there, but I just kind of want to double-click on the theme of -- it's really a conversation we have pretty regularly with investors is that dating is saturated at this point. I guess my question for you is really how do you think about kind of the key growth drivers here within the dating industry?

Sure. So again, back to what I just said, right? I think if you compare even in a market like the U.S., which is arguably the farthest along in terms of dating app usage, the number of people that are using dating app versus the number of singles that are in the market is still pretty low, right? And a lot of it comes down to solving the user pain points that exist for the dating users that want to find relationship, right? The thing that has not changed and is never going to change is people's desire to find relationships, right? And it's not like we are going through a phase where everyone wants to be single for the rest of their life, right? None of that is happening. People still want to find companionship people who want to find relationships. And even those that don't use saving us today and when we do a lot of customer research, they will tell us that they recognize that dating apps are the most efficient and effective way to help them find those relationships, right? So I think from our perspective, the piece that we need to solve for is and we need to do to be better at is how do you solve the user's pain points that exist through a customer's journey, right? So from the time somebody downloads the app. So they create a profile, they pick the pictures that they want, they progress to matching with someone to having a conversation with someone and then getting off the app to meeting someone in real life. That is the user journey. And at every point of this user journey, a user faces pain points. It may be lack of confidence. It may be not knowing what to say to someone, it may be not getting the most relevant match, whatever the case might be. Our job is to make sure we solve each of those pain points, right? So that's what we are focused on as a company. And it is through better and more relevant algorithms. It is through better onboarding journeys and processes. It is through better CRM, better messaging, and it's through use of GenAI tools that will make this process even better for customers. So we are very bullish on the trajectory of us being able to unlock the growth that we know exist. And then the last thing I will say is, and I touched on this briefly, beyond dating, it some is an area that, obviously, we've been talking about now for a while. We fundamentally believe that relationships outside of romantic relationships as a category as an industry is where dating was 10, 12 years ago, right? And if you look at every macro research that you read about consumers, they will -- it will say that people are more isolated than they were ever before. People are lonelier than they were ever before. And if you ask a lot of young people today, they will say they don't know how to make friends. They don't know how to find friendships, right? And the old ways that you met someone at work and you became friends. And it just doesn't exist anymore, right? So people are increasingly turning to apps like ours to solve that problem. And so we are very excited about what that can also mean for us from a growth trajectory perspective.

Got it. And maybe before we transition to more Bumble-specific questions, just sticking with the macro theme. Can you just talk a bit of kind of about the health of consumer at this point, either on a geographic basis, I think you guys have talked about it on an age cohort basis and maybe how this has progressed in 4Q at this point?

Yes. So historically, when we've seen big macro conditions through COVID, through the war that we saw in Europe in Ukraine, energy prices in Europe. We've generally seen our cohort of consumers be truly resilient from a price perspective, from a usage perspective. And that continues to -- until today, I think our Bumble consumer tends to be a little more, college educated affluent, more purchasing power. And we're definitely seeing those trends continue. What we called out at earnings was we are seeing a little bit of impact on our younger cohorts, specifically in the Bumble Boost category. So a majority of our revenue comes from Bumble Premium. And Bumble Boost is a smaller percentage of our total revenue base. And amongst that, we've seen some impact on the younger users. So we are just sort of keeping a close eye on that. It seems to coincide quite closely with the start of the student loan payments in the U.S., and there seems to be a U.S.-centric issue. It's not -- it's something that we see outside the U.S. So we're keeping a close eye on it. Obviously, we'll continue to keep an eye and provide more details when we come back at the time of Q4 earnings.

Understood. And maybe just moving on to the initial thoughts that you guys have given around next year. You guys are talking to revenue growth of at least low teens. And just how should we be thinking about kind of the key growth levers here that Bumble is going to really be pulling on here to execute on that?

Sure. So we haven't given specifics around contribution from payers and our people and stuff like that. But I'll just maybe talk about it at a high level. Bumble App will be obviously a strong driver of growth. We said at the time of earnings that we think it will grow slightly higher than the company level to low to mid-teens growth. Most of the Bumble app growth, a lot of it will still be coming from growth in payers. So I think you'll still hear us talk about payers as a big pillar of where the revenue growth comes from next year. We are very excited about Badoo and its contribution to revenue next -- in 2024. The last 12, 18 months have been about stabilizing Badoo and the recent results have shown that we've started to get Badoo off to a good path. So we're excited about that, starting to become a strong contributor to revenue. And then we have assumed some minimal contribution from things like BFF, which are going to be much more of a user growth driver next year. But we will be testing monetization as well. And then we'll also see nice contributions from things like Fruitz, et cetera. So overall, I think it's a strong portfolio of assets that will contribute to the growth that we have next year.

Okay. Got it. And that at least low teens, there's no macro backdrop changes that we should be thinking about in there?

Yes. We resumed current state that we see will continue.

Got it. And maybe just shifting to pricing. I know you said that, that's going to be -- RPP is going to be less of a driver here. But maybe just kind of up level it here. I guess, just how do you see the opportunity set to increase price in '24 versus what you guys were able to execute on in '23?

So I think from a pricing perspective, it's important to understand that we are always thinking about price optimization. It's an always-on lever for us. We are not looking at doing step-change increases in pricing in the near term. What we do is at any point in time, we are running hundreds of tests on price elasticity across the different geographic markets that we are in. And you'll see us -- that could mean that in some markets, we increased prices, that could equally mean in some markets, we drop prices, and that leads to an increase in payer conversion. We've said this before, but we always try to maximize for revenue. That's really our North Star. And growth in payers and growth in RPP is a function of what's happening in a certain market at a specific time. And also is the RPP that you see at an app level is a function of everything from pricing at a country level to geographic mix shift to how different products are contributing to payer penetration or RPP, right? So it's very hard to fully explain the RPP trajectory because you have a lot of these nuances that impact the ultimate number that you see. But our goal is we still think from a price elasticity perspective, that we have room to increase prices. In many countries, we still have a one-size-fits-all approach to pricing, where we know that we have a lot of high-income people that are willing to pay a lot more than they pay today. So I think you'll see us slowly but steadily continue to work on pricing, it's an always on lever, like I said.

Understood. And maybe just shifting to the margin side, that 50 to 100 basis points of EBITDA margin leverage versus the 100 basis points of leverage that you guys are looking to deliver for this year. How should we think about the puts and takes around the marketing versus product investment and versus really more growth coming outside of -- from outside the Bumble App?

If you look at the buckets of costs that we have as a percentage of revenue, and I won't talk about app store fees, but the things that we are able to control marketing as a percentage of revenue is the highest area of spend that we have. We spend a lot of time and effort on building our brand at the highest level, which has historically been a strong driver of growth for us. It drives the virality of the network effect. So you'll see us continue to invest in that, but it's definitely an area where we should expect to see leverage similar to what we saw this year. Product and tech, again, we want to be targeted in the areas of spend within product and engineering, especially with Lidiane coming in, who comes with that background, I expect that she will want to make sure that we have the right skill sets that we need for the next stage of growth. So you'll definitely see us invest in that area. But again, within reason, the bar for investment will be high. And then we've shown ourselves to be very disciplined in cost as it relates to other areas. So I think we'll continue to chip away at it. And as we scale, it's definitely an area where we will see leverage automatically.

Understood. Yes, just transitioning now to the Bumble App specifically. Within North America, and we've kind of touched on it a bit here, but how should we think about growth runway specifically within North America for the Bumble App? And how should investors think about Bumble's growth on the margin shifting from Tier 1 cities to potentially in universities, more towards Tier 2 and Tier 3 type of cities as we progress through the journey?

Yes. If you go back to what I said about even in the U.S., we still think there is a lot of growth to be had. It encompasses all the things that you talked about, right? So I think it's not like we are fully tapped out in Tier 1 cities, and we have no sort of plan for that. People are always cycling in and out of apps. That's a very sort of normal behavior when it comes to dating apps. So showing up for our consumers in the best way possible, even in some of our strongest markets, it's going to be a huge pillar of growth. Our marketing teams have plans around sort of big pivotal brand moments next year that I think will be interesting. Tier 2, Tier 3, I think, are definitely areas where I would say we can continue to build brand awareness as an app. And that's definitely an area of focus for us next year as well. And from an international perspective, we have different markets that are on different sort of curves of growth. So you have some of the core English speaking markets that are very similar to the U.S. and you – will follow a similar trajectory and strategy and you have some newer international markets that are now have grown to a very sizable user base and now you'll start to see us get more aggressive from a payer penetration perspective. And there are some markets that are still very early in the top of the funnel user base. So it's a mixed approach and playbook in terms of how we're thinking about growth overall next year.

Okay. And you started to touch on it on the international side. But I guess just as we're thinking about the international expansion strategy here, like how much of what you're able to roll out in these international markets? Like winning was so successful going out and doing the grassroots approach in the U.S. university, how much of this is kind of a copy-paste approach here versus having to experiment and see what works in these individual markets?

So the fundamental playbook is not very different in each market, right? We have a very brand-led approach when we enter a new market. We want to find the local influencers on the ground that can become familiar with our brand. They start talking about the brand, they start using the app and then it sort of spread from there. So the brand-led organic word-of-mouth approach is very consistent in a lot of the newer markets that we've been to. And then once we start to see the brand sort of take off in a new market, then we supplement that with paid marketing and gross marketing spend. And now specifically as it relates to the college campuses and universities, obviously, the U.S. is a very specific market when it comes to the way colleges operate. There are other markets outside the U.S. where college campuses have been pretty strong for us. So India is an example where we actually have a pretty strong college presence. We do a lot of events there. And we do targeted university campaigns in other markets outside the U.S. as well. But the college ambassador program that you see is very unique to the U.S. today. Not to say that we don't have an opportunity. I think it's not been as big a focus in some of these other markets as it's been in the U.S. But we are looking at countries where we can replicate the college campus ambassador program as well to see if it will make sense of them.

Got it. So as we're thinking about this '24 guide, should we be thinking about international having an outsized contribution to that at least low teens growth?

So I won't comment on the breakup of North America International, but I would definitely say that international continues to be a pillar of strength for us. It continues to be a big area of opportunity for us as we think about growth in the short to medium term. So you'll definitely see us continue to expand our presence in the international market for sure.

Got it. And just moving on to the 4 tiers that you have. So you have Bumble Boost that we talked a little bit about earlier and then Premium already in the market and then you're testing planning to launch the new tier below Boost, the Bumble Bizz, and then you're going to have the Bumble Premium Plus a tier above the Bumble Premium. So I guess just how is testing coming along? And like what are you looking for really for these different tiers that really start scaling here?

Yes. So when we thought about adding additional tiers, we really thought about it from the point of what the user pain point was, right? And if you think about Premium Plus, we had heard from a lot of our existing premium users that they would be willing to pay a lot more for a curated experience that came in at a higher price point that allowed them to shorten the length and time from onboarding to a match as an example, right? So the goal for Premium Plus is really much more around how do you improve and increase the relevance of the matches that we are giving you and make it much more appealing to that cohort of users. And I think we do expect to upsell users from Bumble Premium to Premium Plus, and that should be a nice RPP driver for us. And then on the Bizz tier, the goal was really to say, we have a lot of people, especially the younger cohorts that use the app for free, but are never probably going to pay for Bumble Boost or Bumble Premium right now because they just don't find -- feel the need to. So we said, okay, how do you create products that they would be willing to pay for, right? How do you create things that allow them to be more expressive, right, whether it's stickers, images, whatever the case might be? So that's how we started to think about the lower tier. And that should be a nice sort of driver of payer penetration because, again, these are users that are using the app daily quite actively. It's just about getting them to open up their wallet and pay for something.

Got it. Maybe moving on to Best Bees. I know we're starting to run tight on time here. I guess this is your AI-powered match curation tool here that, again, available to the Premium tier. How do you think about rolling this out to the other tiers considering the conversion driver that you guys have seen?

Yes. So as we are looking at launching the newer tiers, we are taking a look at the revenue architecture across the product. And that is going to involve looking at what features are going to fit within what tiers. Right now, Best Bees is a feature within the Bumble Premium tier. But that doesn't mean to say that, that has to stay that way. We are constantly shifting features between tiers. And you'll hear us talk more about what does Best Bees looks like in the next iteration of four tier, so to speak.

Understood. And maybe we can just wrap here on Badoo. So you have the big rebrand in '24. It's really about focusing on delivering that message around building confidence. How should we be thinking about this translating to revenue growth? And really, what would have to happen for Badoo to see better than mid-single-digit growth next year?

Yes. So I think -- listen, we're very excited about Badoo. We've always said Badoo caters to a group of people that have strong brand resonance with the product. These are people that are very different than what you would find on Bumble, right? These are people that feel like they don't have a product that talks to them in the way Badoo talks to them, right? Often, they come from an income level that is less affluent than what a Bumble customer might look like – frontline workers, delivery drivers, single moms with multiple jobs. This is the cohort of people that you find on Badoo. And the goal really is -- has been from a brand perspective as well as from a product perspective has been to go back to basics a little bit, help clean the app up. And then from a brand and we talked a little bit about a brand refresh that we're intending to do in 2024 is to help these people be confident again to date again, right? That's really the core tenet of how we're thinking about Badoo. And it's important to remember that we have a very large user base of MAUs that already use Badoo, right? So from a Badoo perspective, the goal is we don't have to go get a new user for the sake of getting a new user. It's about how do you get your existing user base to use the app more and more, and then how do you get them to then start paying for the app. And that's really our focus from a Badoo perspective. The team is very energized and excited to see the strong growth that we've seen over the last couple of quarters. And I think 2024 will be very exciting for the Badoo team.

Great. We look forward to continuing to follow the story, and I think we're over time. So really appreciate you, Anu.

Thanks for having me Chris.

Thanks very much.