Bumble Inc. (BMBL) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. So Cory Carpenter, Internet Analyst at JPMorgan. I have Bumble today, Lidiane Jones, CEO; Anu Subramanian CFO. Thanks for joining us.

Thank you.

Safe harbor. 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 that reflect our current expectations based on our beliefs, assumptions and information currently available to us. Descriptions 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 our earnings press release dated May 8, 2024, in our filings with the SEC including our annual report on Form 10-K for the year ended December 31, 2023, and our subsequent periodic filings.

So we'll transition from that to the Bumble app relaunch. Lidiane, you joined 5 months ago. This has been one of your big early initiatives. So to start, could you give us some background on what you saw when you joined the company and the industry more broadly that led to you to make this decision?

Yes, thank you for being here, everyone. As Cory mentioned, I've been here for almost 5 months now. And it's been fascinating to learn more about the industry. There's a few key factors that I think are really important for us to be continuing to observe. One is how is the TAM? I get asked that all the time. What is the TAM of this category? There's a couple of key factors that makes me really optimistic about this category, the longevity of the category overall. First is that users are now becoming less digital. That's just a factor. Even with the set of anxieties that we're seeing from younger users, they're more and more and more comfortable using technology for everything that they do. And we certainly see that in various Internet engagement services and so forth. So we really believe that the direction is that people are going to continue to engage technology in many aspects of their lives, and they're more comfortable with online dating as a way to meet people as well. So look, just taking those factors into equation it's really great for us. The TAM single users in the world is about 2 billion or still really early in embracing users around the world. But as you observed in the category, we have seen a slowdown with younger users, particularly in embracing it. And for me, it's really about are the products that we have, really meeting users where they are. And our focus really is how do we embrace the fact that younger users want to use technology to meet each other. There is not going to be a world in which love doesn't exist. How do we build experiences and products that really embraces users where they are. So I'm really focused on innovation and monetization in a way that's positive and engaging to users in achieving the success that they want. So I'm really excited to be here. I think this first few months are really about listening -- deeply listening to our customers and start to pave the way towards innovation for the future.

Great. So just getting into more specifics on the relaunch, could you walk through what changed in the feedback you've received so far?

Yes. There's 3 main goals that we're aiming for with the relaunch. And this was just the first opportunity to update the product. Our goal is to have many moments throughout the year where they're meaningful with a lot of product innovation. For me, it was a proof point of speed of innovation, how quickly can the Bumble team move? And it was really impressive to see how innovative the technology team can be and when we provide clear focus that we can deliver on them. So that, to me, was a really great first sign, and we focused on 3 major areas. The first was women's experience. We're really optimizing for women feeling happy and engaged in our product so we evolved our -- make the first move. It still make the first move, but now you can also set a question for men to engage in if you want to. That has landed incredibly well. Women in the product, over 50% have already adopted it. And the relaunch hasn't even been a month old. So that's really a great sign. What that has translated into, from an engagement perspective, is higher yes votes from women and higher conversational engagement, because the starting of a chat is more interesting than just a hey, which is the bulk of starting conversations, believe it or not is hey, so we're trying to get people to get to the next level of conversations faster by optimizing women's experience. And so that's step number one. The second was how do we improve the onboarding experience overall. We know when people can do a better job of expressing themselves higher quality profile also means higher quality matching, because we know more about the users, we know more about what they're looking for, we can do a better job with our algorithms. So onboarding, the first phase of it was simplifying some of the steps, improving some of the intentions and increasing the number of photos, because we know if people go through that process, they really want to be in the app. So it's a higher quality engaged user base. And then the third is really focused on optimizing some of our safety capabilities. Safety in the app is going to continue to be a huge priority for us. We've made some product improvements to eliminate scam accounts and things like that. So that was definitely a really important set of investments, and we're going to continue to do that. Okay, I said 3, but there was one -- fourth -- more, which was really -- and you guys may have heard from my earnings is improving the subscription tiers with a focus on Premium+. We took our first step at improving the experience by adding more capabilities there, one called Photo Analytics and Sights, to tells users which photo is more likely to be successful based on how people are engaging with it. And that's just the beginning of the enhancement of value across our tiers. We're excited about that step forward. But again, these are the 3 major -- or 4 major areas we focus the release on and it's been positive so far.

So the opening moves well received at earnings. I think you had about 5 days of app relaunch under your belt, and you talked about positive early signals. Maybe a new for you. Just now that a few more weeks have passed, what can you tell us about engagement trends and how that's driving your confidence in the re-acceleration in the second half? And then any other considerations impacting your second half outlook?

Sure. So just more broadly before I touch on engagement, through the course of this year, our goal between the work that we are doing on the product side as well as the work that we'll be doing with marketing is to improve multiple metrics, right? So we'll be keeping a close eye on top of the funnel trends, will be watching what's happening from an engagement perspective and then tracking conversion ultimately into payers and into revenue. So it's a full funnel effort in terms of the things that we are doing. To your question about engagement, leading in the last 3 weeks, we've continued to see healthy engagement on the metrics that we had talked about. So we feel good about it. We are continuing to evolve the experience. So the teams are still tweaking things, making changes based on feedback, et cetera, et cetera. So things are trending in the right direction, and we feel confident about what this means for the second half. As Lidiane mentioned, this is not just a one-and-done thing, right? We are going to have a series of product enhancements that we will be making over the course of the year. And we will also be amplifying each of those product moments with brand moments that talk a lot about the product features that we are going to be releasing. So there's more to come. And as we've thought about revenue reacceleration in the second half of the year. We've made assumptions about contributions from each of these. And so we feel pretty good about where we are.

Lidiane, could you talk about your marketing strategy around the relaunch, the results you're seeing from that? And then maybe in particular, if you could address just some of the controversy around some of the recent ad campaign?

Yes. We took a very multichannel approach to marketing, very focused on a balance of out-of-home brand awareness campaign with performance marketing as well as organic on-campus. So it's been a very multi prone approach. The start of the campaign was incredibly positive. We got a lot of reactions in a good way from users feeling like they're really being heard. And that was what we were intending to drive with that. We got a lot of great feedback about features they want in the app is very highly engaged. But we did have a misstep on that, one that unfortunately affected the set of users that we care about. So we felt like it was important to acknowledge, do the right thing for our customers and really get to the core of what our marketing is really great at, which is celebrating women and what our mission is all about. So that's how we're moving forward is ensuring that not only is our marketing attuned to our audience, but also continue to mature the multichannel approach. I think, especially in international markets, we have a lot of room to scale our go-to-market operations in markets that we are seeing healthy growth, and we're going to continue to do that for the rest of the year.

So you both mentioned a few times now. This is not a onetime update, expect more of a regular cadence of the features. What are some of the changes you'd highlight that perhaps do not make it into the first version that are priorities in the second, third, fourth versions?

There's a lot of exciting things that I won't share today, but I'll tell you a couple of things. As you heard me talk about Premium+, we do think that creating even greater differentiation across Premium and Premium+ for our users is going to be really important. And the philosophy behind our subscription tiers is the more you pay, the high -- the fastest, highest rate of success, like so we want to make sure that you very quickly get to find what you're looking for and that you're happy. So what we are looking for with Premium+ is how do we enhance even more so a curation that matches what the users are looking for as well as enhancing how more effective users are accreting their profiles. Again, like if you're better showcasing yourself, the better we understand what you're looking for, and we create a positive cycling of success. So we're going to put a lot of focus on the subscription tier, because we do -- if you think about how young Premium+ is, it's only a few months old. Bumble hasn't had a lot of subscription tiers. So there is greater revenue optimization for us to do just within our own subscription tiers now. So that's a really big focus is ensuring that we enhance and augment that differentiation. And then the last thing is, as we add more capability to the subscription tiers, we can also shift some value for free down the ecosystem. We want to have more free filters and more capabilities that will make the free user happier. Free users are a really big part of the whole ecosystem being healthy. So we want to make sure that we're adding greater value for them as well. So the higher we push and the more free value we can also bring down the funnel.

So maybe taking a step back, just thinking about the dating industry more broadly, you discussed this a little on your first answer. But certainly, from investors, a lot of concern around saturation, growth stagnating in the industry. Could you just expand on what you're seeing and what your outlook is for the dating industry with a particular focus on the Gen Z category?

Yes. As you may have seen today, we announced the acquisition of Geneva. It's a startup focused on communities. I think one of the factors that we certainly have heard from younger users is the way that they want to start with relationships is through community first. And for us, we're really envisioning a more integrated set of experiences of community funneling into dating and vice versa. So they're not unrelated. And we think it's a new entry point to engaging younger users that will help us guide them through their journey of finding love as well. But that's just one. I think within the dating category itself, like just dating app, there's just so much to help users find authentic way of expression. So we're really also looking at how do we augment your own description of what you're looking for, your discovery of what it is that makes you happy, which will help, again, improve the algorithm. The more we know about what you're looking for, the better we are at serving you. And I think a lot of what we're seeing is younger users want authenticity. And so our focus really is on better ways to entry point the dating world and then more ways to find authentic relationships.

So I think there's a lot of hope that AI could drive meaningful innovation in dating. Whitney talked last week about an AI dating concierge. So Lidiane what are some specific use cases you're exploring and maybe just talk about your broader vision of AI and the applicability to the category?

Yes. If we step back a little bit and think about generative AI in general, how many people here use ChatGPT? Okay. I won't tell anybody. It is -- what I love about it, it's a system of reasoning, right? It's -- it can not only input data and use predictive modeling, it can cause deduction as well, which means we can associate multiple facts and then deduct what could happen next or generate content for what it thinks is the right thing. And that system of reasoning is able to capture a lot more information, as you know, now, like many multimodal content, voice, video, typing, whatever model you can enter. The best part about it, from a human interaction perspective, it's conversational. And so the way that we are looking at it is it's an augmentation to the AI systems and data that we already have today. We have really sophisticated models. But generative AI can offer a more human way to interact that allows us to capture more signals about who you are. So imagine if we can look through your photos, your videos, your -- and then really help develop an expression of your profile without you having to do much other than like maybe you describe yourself a little bit through a voice memo or through whichever way it works for you. That's a very low friction, high quality way to create a profile. So our vision is we are going to help you with the lowest possible friction express who you are and what you're looking for in the best way possible. I really believe for generative AI and certainly our principles at Bumble has always been about safety and ethical approach to AI. So it's going to continue to be an extremely high voice, and I believe Bumble can become a really important voice on the advancements of generative AI from a stance of safety and ethic use of AI, especially when we think about quality and women's representation Haven't seen a lot of women in these forums. So I look forward to that changing. But the way that we think about it is if we are using our community guardrails, and we can bring the advancement of the technology in the interaction model that we can really start changing the dynamic of getting to know user, helping the user express themselves. But the user has to feel in control, it has to know what AI is doing for them. So we're going to be playing a really important part of how we're developing products due to transparency. So our users always know and are always in control of the AI that's working for them. So I'm really, really excited about it as I'm sure you can tell, I think there's just a lot that we can do in terms of human interaction, especially on a field like this.

So I think a key theme, you've been busy your first 5 months in addition to the app relaunch, some other big changes you made early in your tenure, you reorganized the company that included a 35% RIF. Could you just tell us where you are in this process and why you made those types of changes to the company?

In all fairness to the leadership team for Bumble, a lot of the restructuring conversations have started before I joined the company. I think what I brought to the team was, how do we organize for accelerating innovation and that -- and elevating the portfolio as a whole? So that was a big part of the reorganizations we were able to identify some additional optimizations to the org to help us move more quickly. We're coming at the tail end of that transformation, just from the execution of it. We have employees in many different parts of the world. So it's taken a few months. But I'm so amazed by how focused the organization stayed throughout the execution of this relaunch. It's not very common that you're restructuring over 30% of the company, and you still deliver your product on time. So it's a huge testament to the talent that we have, but also the focus that the company has. I was amazed myself. I had a bit of a buffer built in there, but we didn't need to. Like the company is very motivated. So I think it's been just an amazing proof point for what we can do as an organization. I think focus and execution are the name of the game, and that's what we're going to do for the rest of the year.

And Anu, maybe for you. So along with the reorganization, you guided to over 300 basis points of margin expansion this year. Could you just walk us through the cadence of margins through the year, what you're expecting? And where do you still see opportunity longer term for leverage in the model?

So I think if you look at this year, we talked about -- you already have your margins for Q1. We talked about Q2 being a low-margin quarter, largely because of the relaunch and the amount of marketing investment that will go behind it. As you go through the rest of the year, you should start to see leverage on a couple of line items. One is marketing as a percentage of revenue should start to come down. We still have, on a dollar basis, a decent amount of marketing investment plan for the second half of the year because we want to make sure that we have those brand moments that we talked about to augment the product work that we are doing. But as revenue accelerates, you should start to see leverage there. Coming out of Q2 into early Q3, we should start to see the savings from the headcount reductions that we announced. So in product and engineering and in G&A, we should start to see leverage from those line items as well. And that should lead you to the at least 300 basis points of margin expansion that we've talked about. We're not going to give margin targets from a long-term perspective. But all I will say is our commitment to expanding margins has not changed, and you've seen over the last 3 years that we've been public, we've continued to steadily improve margins. And this year, it was a little bit of a step function, but our commitment to continuing to increase hasn't changed. We want to continue to invest for the growth that we know we can have, but we also know that there are efficiencies that we can continue to get over -- across the company in several items. And so all through this year, we are spending a lot of time looking at efficiencies, whether it's in marketing, whether it's in just product and engineering, all of the cases. And in some of those cases, we'll drop it at the bottom line. In some cases, we'll reinvest into other areas. But you'll see us talk more about it in the coming quarters and years.

So sticking with you, Anu, on macro, certainly mixed signals around the consumer health and just discretionary spend. I think one of your competitors, in particular, called out pretty significant weakness in all the card spend. So what are you seeing on the macro side across Bumble App and Badoo?

So maybe I'll start with Badoo first and then move on to Bumble. So Badoo, as you all know, operates in a different segment in terms of its user base. A Badoo user is often someone that is a frontline worker often has 2 jobs. So they were hit pretty hard by COVID and then some of the macro issues, especially in Europe, coming out of COVID, they were hit hard by the war in Ukraine. We are starting to see some stabilization with our Badoo user. Still not where we would obviously want them to be, but we've seen good progress in terms of how Badoo has performed. So we feel really good about that. We're doing some work this year on what we are calling rearchitecting what Badoo's revenue structure looks like. And so similar to the work that we are doing on Bumble, on Badoo as well, we are taking a look at what do the subscription tiers look like, what does the free experience look like, what does the high-end experience look like, because we want to make sure that conversion on Badoo improves, because Badoo has a large user base but a pretty low conversion rate. So we want to focus on improving payers on Badoo. On Bumble, as we said at earnings, we are seeing, especially in the U.S., some weakness in top of the funnel, especially as it relates to younger users. We hear from our younger users that they are being a little bit more thoughtful about where they are spending money. They're still wanting to use the app as we've heard a tremendous amount of feedback coming out of the relaunch, but just a level of cautiousness in terms of where the overall macro sentiment is. It's something that we are keeping a pretty close eye on. And we've obviously factored that into what we think the performance looks like in Q2 and beyond.

So international for Bumble App, still very early. We've talked a lot about the more challenged U.S. stating market, but what are the trends you're seeing outside of the U.S.? And could you just talk about your kind of international road map?

So international has been great for us. If you go back to even the last 3 years, international has been an active area of focus for us. We are focused not just on growing payers in international markets, we are very focused on growing our overall ecosystem and growing our active user base. And depending on the region, they are all in different stages of growth at this point. We kicked off our international expansion in 2021 with expansion in Western Europe. Those markets are doing really well. We are in the top sort of 5 download markets in most of those regions. We are actively moving into driving conversion in those markets, so making sure that penetration in Germany or France or Spain continues to grow is something that we are very keen on. Markets like Asia and LatAm are growing markets for us. Within that, there are pockets like India, we've talked about, India is a pretty strong market for us, historically has been. So putting more focus there. And then in some of these other markets in Asia and LatAm, just we're still very much focused on growing the user base and growing the ecosystem. Candidly, I think we see international as still something that is early in its stage of journey. And as -- when you're a small company and the U.S. is such a big part of what you do, all focus sometimes tends to be just on the U.S., right? And so we -- this year, we want to be even more deliberate about growing our international regions because we know there is so much growth still to be had there. So we're very, very excited about where some of those markets are going.

So Lidiane, back to you. You've been involved in your fair share of M&A in prior roles. This morning, you announced your first one at Bumble and Geneva. You mentioned that earlier. Maybe could you expand a bit on that acquisition? And then just more broadly, your appetite to add new brands to the Bumble portfolio.

I look at acquisitions, not just from the profile of the M&A cost and potential revenue add, but at the success of the integration, maybe because I have lived so many integrations directly. With Geneva, for us, there are a few factors. The first that I mentioned is creating an entry point for younger users. There's a lot of opportunity for us to not only diversify some of the business, but also extend the lifetime value that we offer users that are in our ecosystem. So I'm very excited about doing that. The second factor for me is the technology stack. The stack is very good. There is just a great scale to how they've built it, surprisingly great scale, especially for a smaller company. And so I'm personally very excited about that because we can use portions of that technology to innovate in dating as well. So I always look at a technology leverage and the way platforms are built. So that is going to be the lens in general that we look at is how do we augment and grow our business, but also bring in a technology asset if it is a technology-based company that will accelerate our innovation velocity even more. Not -- if it's only one particular vertical, then you're kind of limited, but if there is enough there that you can actually maximize your portfolio, that's a huge one. So it tends to be, I think, Anu mentioned in our earnings, our bar for the quality of companies that we will look at is really high, but there is opportunities. We'll continue to look at opportunities to accelerate growth. Our focus is growing the company, and we'll keep our eyes open for great technology, innovative companies to join us.

So sticking on capital allocation, a new $300 million cash, just over 1x net leverage, still a bit of a sponsor ownership. You increased your share buyback authorization this quarter. Could you just talk about your capital allocation priorities given your current financial profile?

Sure. I'll -- we've talked about this quite a bit. I think our first and foremost priority is continuing to grow our business. And so focusing on organic growth is a priority for us. Obviously, we've given margin targets for this year. So we will obviously be keeping that in mind, but that's priority number one. Second one is M&A. Lidiane spoke quite a bit about it. I think we continue to be excited about ways to accelerate our product road map through acquisitions like Geneva. So if something came up that we found interesting met the bar that we have, I think we would take a look at it. And we feel fortunate that we have the flexibility to make some of these acquisitions. So I think that is definitely a priority for us. And then the last one I would say is our share buyback program. I think it gives us the flexibility to opportunistically buy shares in the market. We definitely think that investing in ourselves is a very good use of money, especially at current levels, and so you'll continue seeing us do that as well.

Two more questions, and we'll end on word association. So Lidiane for you, you've talked a lot about the potential you see in BFF, which you really took a fresh look at when you joined. Just what's your vision here? And do you expect BFF to become a meaningful contributor on the monetization side over time?

Yes. I got a chance to speak to so many customers this last few months. And one common theme is these moments in life, whether you're looking for a partner or you're moving to a new city or you're a new mother, they're still extremely isolating for people. And what's missing is an ability to meet real people in your real communities, which are DNA is on. We focus on you actually meeting in person. So we're really looking at this as an opportunity to help communities really find communities with real people that are based in your local community. So I'm really excited about the opportunity that gives us because it just gives us an option to not only continue in our subscription model here, but also look at partnerships and advertisement more holistically over time. So diversification is an important part of how we're looking at the long term of the business. So that certainly is the fresh look. But as I mentioned earlier, having a very integrated experience to dating is a priority as we look at this. A huge community, especially for women is what happens when you break up. You look for communities. So there's a lot of use cases that are surrounding the dating journey that we want to nail it incredibly well in the early days of this product under our company much more over time.

So -- and on Badoo before word association. You stabilized Badoo, it had a tough few years. Could you talk about what drove the turnaround? And what role do you see Badoo playing more broadly in the Bumble portfolio over time?

Sure. I think the -- and I briefly alluded to it when we talked about macro trends. But the biggest focus for Badoo has been -- so Badoo has a large user base, which is a very loyal following. And we have Badoo users that have been on the platform for many years and continue to come to the platform to find quick fast connections, right? And a Badoo user often is constrained in terms of time. And so they don't have the time and sometimes the inclination or the means to create fancy profiles to spend a lot of time evaluating what someone else has written, all they want to do is come to the app and find someone to have a conversation with. And that's where Badoo has done really well. We've leaned into that from both the product experience as well as from a brand experience. And really, the work that the team has done over the last 12 months has been around how do you build confidence amongst the Badoo user. Dating can be hard. It doesn't matter who you are, dating is -- can -- dating can feel intimidating. So we've really leaned into giving the Badoo user confidence in showing up authentically in terms of who they are and finding the partners that they want. That's really resonated with our user base. We've also decluttered the app a little bit. The app feels much more simple. It feels cleaner, and that's really resonating with the Badoo user as well. So we are excited. Like I mentioned, we'll be doing some work on a revenue rearchitecture for Badoo over the coming quarters, which I think should also help monetization for the platform.

All right. Thank you for leaving time for word association. So Lidiane has not seen these words. So I will say a word and you say the first word, one word ideally that comes to mind.

I'm really shy, so this is hard for me. Just wanted to call that out.

So first one, online dating?

Bumble.

Hinge?

Competitor.

Gen Z?

Hopeful.

Badoo?

Opportunity.

Generative AI?

The future.

All right. That's it.

Thank you.

Thank you, all.