Bumble Inc. (BMBL) Earnings Call Transcript & Summary

Good morning, everyone. Thanks for attending. My name is Curt Nagle. I'm the mid-cap Internet analyst here at BofA. With me today is a Anu Subramani -- Subramanian, yes, I always mess that up. My apologies, Anu. Who as a CEO -- CFO of Bumble for the past 4 years. Before we get kicked off and start the questions, I'm just going to read the safe harbor. This presentation, including comments and answers to questions may reflect forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations on our beliefs, assumptions and information currently available to us. Descriptions of these risks and other factors could cause actual results to differ materially from these forward-looking statements and are discussed in more detail in our earnings press release dated May 8, 2024, and in our filings with the SEC, including our annual report on Form 10-K for the year-ended December 31, 2023, and for subsequent periodic filings.

So with that said, Anu, thank you so much for joining. I guess just kicking it off, I think a question on this industry would probably be a good place historically online dating apps, high growth or relatively high growth, both in terms of top of funnel, in terms of payers. Trends did start to slow in 2023 at the start of the year for the industry as a whole and it kind of stayed there for a bit, in terms of why all sorts of theories floating around, whether it's demographics, whether it's a lack of real product development or innovation over the past few years. But in terms of your expectations and your biggest competitors expectations, you do think that there's going to be an inflection in growth trends in the second half of this year. Both of you were launching new products, you've got new marketing, new apps coming out or new versions. With that said though, I guess, just simply what gives you the confidence that the industry at least can start to re-accelerate after about 1.5 years or so of tough trends?

Sure. Of course, thanks for having me here. Great to see everyone. I think if you zoom out for a second and you think about back to when dating apps started, the thesis has always been, you have a ton of people in the world that are constantly looking for relationships. That trend has not slowed in any way. If anything, people are only more lonelier than they ever were. And so, they only need relationships at a higher rate than they needed. A lot of these trends that we saw 10, 12 years ago, again, when dating app started in terms of stigma around using data apps have all become only easier, have lessened. The world is more digital than they ever were. And there's a lot of talk like you said about, oh, our younger users, dating apps users dating app -- using dating apps. And these people are -- have grown up in the online world, right? None of these people are going to bars and restaurants and churches and meeting people going forward, right? So all the trends absolutely point to people continuing to be online and continuing to use online mechanisms to find people. And across the board when we talk to our users, they tell us that the value the dating apps provide in terms of being the most effective and efficient way to meet other people has not gone away in any ways. I think where we need to really be focused on, and this is what Bumble has been doing from the relaunch perspective is on enhancing and evolving the product experience in a way that appeals to a wide variety of users. And that is the fundamental premise of what our relaunch was about. And in the months that we've done this relaunch, we've received a ton of feedback from users around how excited they are that we've acknowledged that we need to evolve the current user experience. And that's what gives us a ton of confidence, because when we launched our original teaser that the new Bumble was coming, we heard so much feedback from especially our younger users about how excited they were to see how this would evolve. So we're super excited about what this means for us. And as we've said about our relaunch, for us, it's step 1 of a series of steps that we intend to take. So this isn't a one-and-done thing. I think you'll hear us talk about this quite a bit over the course of the next 3 quarters.

Cool. I guess maybe stay on this topic of the new Bumble. So you've been at the company for 4 years, new CEO, Lidiane Jones came from slack, been in the seat for a little less than 6 months, I think. So a lot of changes come through, right? A lot of it is operational, right? So I think the message is sort of leaner and meaner, right, processes in terms of making quicker decisions, right, got some new leadership in -- under Lidiane. So, I guess just from your perspective and right, someone who's been there a while, I guess could you give some specific examples in terms of some of the changes that they made and how they have adapted Bumble to be leaner, quicker and hopefully quicker growing?

Yes. Sure. Maybe I'll give a little bit of context around how we've thought about some of the changes that we've made. And for those that don't know in early Q1, we announced that we had made the difficult decision to eliminate about approximately 350 roles. And it's been great to have a new CEO come in and take a fresh look at the sector and also the state of the business and just bring a Silicon Valley mindset to how she wants to think about product velocity, how she wants to think about how fast she wants the engineering teams to move. And a lot of the changes that we are making are really for us to be better set up for growing faster. So that's really the genesis of all the changes that we are making. The [ org ] transformation was largely centered around sort of 3 big operating philosophies. One, we decided to move back to a functional model. And we wanted to be building products more from a platform perspective and not be siloed in sort of different apps. And so, we've now have a new CTO that has joined who has decades of experience from places like Microsoft. We have a new Chief Product Officer, again, who has spent her entire career in Silicon Valley. So all of these people are coming in the very sort of unique way of how do you build products that span the entire ecosystem and not just for one single app. So that's been a big part of the change that we've made. We've also been looking at our location strategy and how do we rationalize, where our engineers and where our product and team sit. So that was, again, part of how we thought about the org change. And finally, as you can imagine, as a company grows bigger, inefficiencies creep in, in terms of multiple layers and additional things that get in the way of a company being able to move fast. And so we've taken a hard look at spans and layers and eliminated some roles, primarily again with the goal to set us up to move faster. And what's been really exciting to see over the course of the last 5 plus months since we've had the new team come in is our -- we got the new product refresh done in record time. We brought it out really fast. We announced the acquisition of Geneva, again, a record time in terms of starting to when we announced it. So we are definitely seeing that the organization is moving fast, but it's a continuous effort, right? Again, this isn't like one-and-done. I think you'll see us get better and better at decision making.

Okay. Maybe just staying on I guess, that theme in terms of efficiencies and specifically with costs. So as you alluded to, you've made some pretty significant head count cuts roughly less than 2 months into Lidiane's started for tenure, but I think about 30%. Just kind of the basic question is in terms of thinking about the current expense base. right now, are you in a position, right, or are you -- you have the resources now to re-accelerate back to a double-digit rate? And yes, so how should we think about that?

So like you said, we eliminated about 350 roles, which is roughly about 30% of where our head count was at the beginning of the year. We are -- that roughly translates to about $55 million of annualized savings going forward. We are investing about $15 million of this back in the business. And again, we have made the decisions that we've made around org changes, primarily to set us up for growing faster and to ensure that we have the right talent that we need. And so, in terms of the investments, you'll see us invest in talent in more data science engineers, machine learning, Gen AI engineers, that's the talent that we want to be investing in. And so, a lot of what we've done is to make room for the growth that we know is ahead of us. And so, growth -- organic growth is still very much top of mind for us. And we feel very good about where we are from a P&L perspective to enable that. This year, we expect to be expanding margins at least 300 basis points. So while we are feeling very good about investing for the growth that we have, and we have room in the P&L for that, we are still very committed to expanding margins as well. So you'll see us continue to be deliberate about the decisions that we make. And there are still efficiencies that we expect to find whether it is in how we think about our marketing strategy, whether it's about how we think about our overall sort of tech strategy, things like that. So that's an ongoing effort this year, and there's more that the teams are doing. And there's a lot of bottoms-up work that we are doing. And the goal would be to find savings and either drop it to the bottom line or to reinvest it back into the business to enable the growth that we talked about.

Okay. Got it. And so, spend a little bit of time, so you made another big change, right, introduced opening moves, which at least on paper is fairly radical, a big change in terms of kind of a signature feature of Bumble, right? And women can now have the option right of making the first move, right? Again, just sort of a cornerstone of how people think about the brand. So I think part of the decision you and Lidiane had indicated that some of your users indicated there's something that they may be looking for, I think the initial usage is pretty good about 50%. But maybe if you could just share a little more on the customer response, right? And I guess, what you think could come with this in terms of perhaps broadening the user base with this change?

Yes, sure. So if you go back to when Bumble started, Bumble started as app that puts women at the center of relationships. And the relaunch has been about us reaffirming that commitment that we've always had to women. So just to avoid sort of any confusion, at Bumble, womens will make the first move and we'll continue to do so, and that has not changed. What we have heard from our user base over the course of the last 10 years and more recently is, how people think about empowerment, how people think about equality. Those things are evolving, especially amongst younger users. And we've heard from some people where they have said that they feel like the burden is always on them to take the first move. So, we've effectively introduced what we call opening moves, which allows, if you are a -- if you are on Bumble, it allows you to set an opening question in your profile. So if you're a woman, you still -- and you match with someone, you have a choice. You can either still choose to make the personal like you used to for the relaunch. Or now you can set an opening question and a man can effectively use that to start a conversation. So this is really much more about giving people the choice to lean in or lean out depending on how they feel at a certain point in time. It doesn't change the focus that we have in terms of women are still in control. This is much more about removing some of the burden that they feel like sometimes is put on them. So we definitely see this as benefiting both men as well as women because both sides feel like they have a better experience now because men feel like they have the chance to start a conversation and they can express their personality and women can effectively be alleviated from making the first move, if they choose to. Like you said, we've seen very strong adoption so far. We are very pleased with what we are seeing. We're also seeing quality of conversations get better, quality of chats get better. So overall, we absolutely believe that this will be a positive to the overall ecosystem, and we are very thrilled with the way the teams have built the product.

Got it. AI, I'd like to talk about, I guess, the potential upside case from AI. So you've talked a little bit about prove some tools or building in AI tools that should help break key friction points, whether it's from photo selection, whether it's from profile building these things where perhaps someone doesn't know what to say, and have the confidence, right? I mean have been friction points, right, in terms of the process. So I guess just walking through that in terms of what that upside case is, and then as a related point, thinking out, I mean, kind of who knows, but the next 5 to 10 years, in terms of the impact from AI, how dramatic could that be from kind of the current form of the dating apps within that time period, do you think?

Listen, I think everyone talks about AI and the context of AI can defer for different industries. I think for dating and for us, specifically, AI is much more about enabling human connections, right? AI is not to replace human connections in any way. We are ultimately about helping you meet other people that you can then go meet in real life. That's the goal, and that's the mission that we have. We look at AI as an enhanced tool that makes relevancy, that makes conversations like at a much more elevated level than we've historically seen. And we use sort of more traditional AI models, machine learning models quite extensively today on our platform, and that's what powers our matching algorithms, it powers how people meet other people, et cetera, et cetera. I think with Gen AI, you have the option, like you said, to remove a lot of the friction that exists today in a user's journey. And there is a lot of data that we collect as part of onboarding a user, right? And so, with the new tools that exist from a Gen AI perspective, I think we have the ability to further sort of make that process much more easy and whether that involves helping you pick the best profile picture for you, whether that involves getting you to match with the most relevant person, whatever the case may be helping you think about what you write on your profile. All of those things get pretty exciting. And I think over the long-term, I think we are still in very early innings of what Gen AI can look like. But as Gen AI becomes more multi-mode in terms of voice and more than just text. I think there are lots of use cases that we will see in March. But again, with the cold ultimate aim of still helping you meet real people in real life.

Not a product for the sake of a product, right?

We're not looking to build AI just for the sake of building AI.

Yes. Okay. That makes sense. So you touched on it a few moments ago, acquired a company called Geneva, integrating it now in Bubble for Friends. Part of a grander strategy, I think you could say, moving beyond just sort of romantic relationships in terms of the platform that Bumble offers. You've talked frequently and something that Whitney certainly has talked a lot about sort of the questions of loneliness and perhaps this being kind of a means to address it. But specifically kind of, I guess, what is that opportunity for Bumble from a monetization perspective? I guess, how would it perhaps differ from meetup as an example of friendship or a community app. But just a little bit more specifically talking about what that could mean for Bumble from...

So if you go back to when BFF was started, we actually built BFF because we heard feedback from our users. Users that had come to Bumble found their romantic partners were in committed relationships, but still set like they needed a product that allowed them to meet other people for platonic relationships. And so, people started to say, "Hey, I'm in a committed relationship, but I'm looking for a friend to go have a drink with. I just moved to a new city, I need a new yoga buddy." That's really how BFF was started, right? We built it as a response to a lot of users that told us they wanted the product. And today, BFF has a very loyal user base of people that have gone on to become best mates at their weddings and godparents to their kids and really long friendships that have come out of the BFF product. And if you think about the product experience today, BFF is still very much a one-to-one experience similar to what the data product looks like. And as we've thought about evolving that, we've always talked about friendships as being much more community-based, and we all tend to find friendships through stages of our life, where we either go through moments of happiness or we have moments of grief, and that's when we all come together as communities and as friends. And so, we really are thinking about evolving BFF to be much more of a community-based product. And that's where Geneva comes in, because Geneva has built a very strong technology that enables that sort of community interaction to happen. I think where we are different from some of the other products that you referenced is, our goal is not to again have people go meet in a mass group environment and still not know who each person is in a group of 100 or 200 or whatever the case may be. We are still going back to what we said about dating. Our goal from a friendship perspective is still to enable you to meet people that you then go become friends within real life. And so it may be 3 people that live around you that you become running partners with, or if you're a new mom, it could be a group of 3, 4, 5 women that all gave -- had babies the same time as you, and you are growing as a new mom. So it's much more about making that real life connection and having a platform that enables that real life connection. That's how we are thinking about our friendship platform. And to just briefly touch on what that means from a monetization perspective is, I think BFF now gives us a really strong platform to evolve beyond just the core subscription product that we have. And if you think about the use cases that can span sponsorships, advertising, it's quite endless in terms of how much more we can do from a brand perspective. And I think the most important thing to remember here is our brand gives us permission to go beyond dating, because I think a very special aspect of what Bumble has always stood for. The brand extensibility we have is quite sort of unmatched. So they're very excited more to come, but this is, I think, the beginning of that.

Maybe just as a quick side question to that or related question. What about from a perhaps maybe an engagement perspective, right. So unlike sort of traditional subscription services might be a year, right? I mean, you know what sort of the stickiness is. I mean the mechanism of the app is people turn in and off. So in terms of maybe broadening engagement, keeping the brands, obviously, it's a great brand, but keeping a little more top of mind and maybe making it a little bit easier to kind of reconvert people. Is that part of the strategy, Anu?

Absolutely, yes. If you think about sort of LTV on our platform, because of the fact that dating generally tends to have high turn because our goal is that you meet someone and hopefully, you have a happy relationship. You often get someone on the platform, they meet someone and then you effectively lose them. And so having a larger platform that touches people at different points and their relationship allows us to extend that LTV. And historically, we've always found that people that use multi-modes, both date as well as friendships tend to have sort of higher monetization power because they just see more value in the product. And so, we definitely see this as a mechanism to extend the LTV of a date user as well. And also, if that person is on the platform already using us for friendship, but their romantic relationship doesn't work out, it enables us to recapture them into the data app also in a much faster way. So I think there are benefits to the date ecosystem as well with us expanding our platform beyond just dating.

Okay. I'd like to touch on the new marketing campaign or a brand relaunch. I think it's the first one in a while. So I mean kind of a couple of ones in terms of just obviously, it's a means to try and acquire the users, but primarily target new users, lapse new users, right, users within perhaps the ecosystem and perhaps promoting new features. How are you thinking about that? And then just, I guess, from the perspective of thinking of past big brand campaigns, any metrics you could give in terms of what that did to usage or payer conversion or any other metrics you think are relevant?

Yes, sure. So we have a pretty strong brand marketing ecos that we've cultivated over the course of almost a decade now -- more than a decade now, which is something that we're actually very proud of our -- we always say our brand is our biggest smoke. And we historically have focused on multiple different touch points from a marketing perspective. And each marketing campaign, obviously, has different KPIs and different metrics that they cater to. I think the marketing campaign that we are doing in Q2 is a little bit different because it's much more about relaunching the brand. And like I said, this is the 10th anniversary of Bumble having started. And so, we really wanted to go to the market with a sort of a bigger brand refresh talking about what the app means to different people and in different people's lives. And so, we are much more focused on having a rebound version of what the brand means. We are still leaning into what we are very famous for, right, which is about women's experience, which is about safety, which is about empowering people on the platform. So we're not trying to change our image. We are much more about showcasing what we have already been historically very, very good at. And as we evolve our marketing over the course of the year and as we also launch other product features throughout the second half and beyond, we want to be pairing our marketing much more closely with those product launches as well. And so, we will move from much more high-level holistic brand campaigns to much closely tying it to the product feature that we are launching. So at that point, we'll be looking at KPIs that are much more closely tied to conversion and products. And right now, we are much more focused on reach and awareness. That is what the brand campaign focused on.

Got it. And then as another related question. As part of this campaign, how much are you leaning into on the ground guerrilla marketing. That's something -- historically it's been a big strength of yours. I guess the biggest example would be the honey ambassadors, you have on campuses?

Yes. So Bumble actually started on college campuses. That's how Whitney started the app, and it's always been a core strength for us. So I think you will see us continue to lean into that. We have 500-plus brand ambassadors at any point on different college campuses. We are looking to further evolve that, make those brand ambassadors have even more targeted goals in terms of what they need to be doing for us. We've also recently launched a legacy Bumble program, where these are people that have just recently graduated from colleges have moved to new cities, but have had very close associations with Bumble, and they then start to replicate a lot of what they used to do at a different level in some of these new cities.

And that's brand new.

And that's new that we are launching this year. So, there are different things that we are doing to make our on-the-ground marketing campaign really special, because again, it's something that's been very strong for us historically, and we want to continue to lean into that.

Okay. Let's see here. I guess there's only a few minutes left. Maybe one just in terms of -- so still a growth brand, right? If I'm thinking about in terms of just your geographic spread, there are a lot of markets where you're not highly penetrated relative to say, the United States and maybe parts of Western Europe. So, I guess where are we in terms of the innings for some of your more mature markets? And in terms of newer kind of frontier markets, where you see the biggest opportunities from a total user and then a payer perspective?

I think across the board, even at a global level, I would say, at a payer conversion level, we are in very early innings of growth. Even in a market like the U.S., which is our largest market, we would still characterize us as being in early innings. We obviously have a ton of strength in key Tier 1 cities starting to get more strength in Tier 2 cities, but there's still a lot more that we can do if you think about the size of the available market and where our presence is. I think there's a lot more that we can do to further build awareness and get more users. And then in international markets, I would say, we are in very early innings. 2 years ago is really when we started to make a big push internationally and now markets invest in Europe like Germany and France have been very strong for us. We have organic presence in a lot of markets in Asia, markets like India, where we have spent some money, but nothing that we've really gone and done. We're excited about having a more deliberate strategy there in those markets. Similarly, for LatAm as well. LatAm has a lot of markets that have just organically grown. And I think the advantage of having a free app is anyone can download the app and just start using it. And 2 people find success on the app. They talk about it on TikTok at Instagram and before...

Who knows, yes.

There is vitality and more people download it. And then we can then follow that up with more targeted marketing campaigns that then started to build the buzz up. So we're very excited about our international expansion. I think we've done really well, as you can see in our download data on top of the funnel. So excited to see where we go with that.

One more really quick question, just segueing on that. In terms of -- and this maybe is more focused on your international markets, but I guess, willingness or -- willingness to use advertising, right, to better monetize some of these nonpayers or some of your more emerging growth markets. Is that a focus for the company?

I think we've always said advertising in the core dating construct for us, you have to be careful, it can feel invasive to someone's personal experience. I think we've started testing some innovative ad strategies on the core Bumble app, but I think advertising for us is much more exciting in the beyond dating world, where it can be much…

Okay. Well, terrific. Anu, thank you so much. Great conversation, and thank you, everyone, for listening in.