Bumble Inc. (BMBL) Earnings Call Transcript & Summary

Okay. I think in the interest of time, we're going to get started here. I know people are still shuffling in, but unfortunately, we have to keep the train moving on time here at the Communacopia + Technology Conference. It's my pleasure to welcome Bumble to the conference this year. Lidiane Jones, CEO of Bumble, thanks so much for being part of the conference.

Thank you for having me.

Okay. So I'm going to read the safe harbor first. Then we're going to get into questions. This presentation, including comments and answers to questions may include forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect current expectations based on our beliefs, assumptions and information currently available to us. Descriptions of those risks and other factors that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in the company's earnings press release dated August 7, 2024, and the company's filings with the SEC, including their annual report on Form 10-K for the year ended December 31, 2023, and subsequent periodic filings. Okay. Safe harbor established.

Thank you.

To level set, you joined Bumble at the beginning part of this year in this role. Why don't you talk a little bit about what attracted you to the role and what your key learnings have been since you joined the company?

It's good to be here and see some familiar faces today. What attracted me to Bumble was the brand and the mission of the company that was immediately what I felt there's so much potential and opportunity for a brand that stands for something that's so big and broad. And so that would be immediate pull. And since I've been here, I feel more excited about our opportunity now than I do than when I first got here. I think there is just a tremendous amount of customer need for connection. We are experiencing the biggest loneliness epidemic and society. So the need for true human connection is incredibly great. And that's what we're really aiming for is to serve a bigger purpose for our customers in dating and beyond. [ So I'm excited ] to be here.

So maybe double-click on that last point with respect to the market opportunity. Because when I go out and talk to investors, one of the biggest debates is around market opportunities. They see companies in this sector sort of struggling for growth, especially on the user side. And you have obviously just come in with a fresh set of eyes. Talk a little bit about the need to drive a different type of connectivity across users create platform effect and how that feeds into your view more broadly about the long-term market opportunity?

Yes. In terms of the dating category, what we're seeing is a set of customer needs that have evolved over time compared to what the category has served. And so we certainly are seeing that reflect in the softness in the category overall. But to me, this is what attracted me to begin with is that there is more from a product innovation that we can do. People, again, are looking for connection, but they're looking for a more complex and more nuanced suite for finding each other. So I'm really excited about what we want to do for the category overall. But if I look at multiyear from now or people going to continue to be online, absolutely. That's just been established. And how we do that, I think you want us to fulfill. And then when I think about market opportunity for Bumble specifically, Bumble has always believed in connection, dating and beyond with BFF. And just about 2 months ago, we closed our acquisition of Geneva to give us the opportunity to fulfill the connections and friendship. And I think especially as we're seeing the dynamic of users wanting to meet with communities as a first step towards finding their love life as well, it gives us an opportunity to further expand our footprint in the category. So we're really looking at seeding as a reinvigoration of our customer base and expansion of our TAM, [indiscernible] more holistically.

Okay. Probably the biggest narrative coming out of the last set of earnings was your plan to strengthen the Bumble app ecosystem, improve the user experience, eventually create more effective monetization. Maybe take a step back and talk about what might be the decision to reset the Bumble app and rethink about where you want to take that app over the medium to long term?

Yes. When we launched our Bumble relaunch is the first chapter. Earlier in the year, I talked about our innovation journey as a multi-SaaS journey. And in April, we launched the first one. We learned a tremendous amount there. One is that our customer engagement increased. But as we added more friction for users to enter our ecosystem, some of the metrics around activation declined. And so we saw those interesting paradox. As we want to deliver better customer experiences that we're adding some friction to the monetization. So what we really are doing from a lease up perspective is bringing customer centricity to our comprehensive plan. And as I mentioned at earnings, there's kind of 3 major steps to our plan. One is ensuring the ecosystem. We mentioned the ecosystem that everybody [ whose ecosystem are looking forward ]. People come here to meet people that the people that are here are well represented, that their intent is right and that we're matching them the best way possible. The second is the customer experience is that we're delivering in safety, but also across the portfolio that we have our apps, as they are really great in meeting the needs, again, like being much closer to what our customers are asking for. And then the last one is ensuring that the monetization we have -- we're not -- one thing I want to clarify is that we're not pausing any initiatives. What we're doing is just taking a step back to look at the re-architecture of our subscription tiers because we think there's more we can do on the fee side and in each one of those ensuring that there's clear value so that we can see greater conversion at Premium and Premium+, but not just looking at Premium+ alone. And so looking at this comprehensive plan gives us an ability to innovate and we accelerate growth in a way that is sustainable and meeting customers' needs where they are today. That's what that was all about.

Maybe there's a couple of things you talked about in there that [Technical Difficulty]...

We're really having tech [Technical Difficulty]...

We'll share the mic while I ask the next question. So you touched on a couple of things in there. Maybe come back on the user ecosystem. When you think about creating more balance and the types of users that you onboard onto the platform and create a sense of community around the platform. What are some of the key initiatives you think you need to put in place to have the balance around users be correct as you think about what you're trying to accomplish in the years ahead?

When we talk about ecosystem, it's how much -- it's a very nuanced and complex set of variables that makes up the ecosystem. It's the balance of people in terms of gender, in terms of age, in terms of the intent, in terms of also engagement. All of that plays a role into the health of the ecosystem. So what we are doing is ensuring that we are attracting the right balance across all of those variables that when people enter the ecosystem that they're highly engaged, the higher engaged they use it, the more successful they are, but also everybody around them is. And when people are getting more engagement, they are more likely to convert and more likely to stay on the platform for longer. So there's very important sustainable metrics for us in that regard. So we are very focused on ensuring when we think about acquisition, we are putting a lot of efforts around our marketing initiatives to drive a more sophisticated model for how we're going to market. For the markets that were more mature like the North American market, our focus is acquisition that is a little bit more nuanced for places like Tier 1 cities like New York -- or New York like cities where we already have a really great brand awareness. What matters more is experiential than performance marketing per se. So the marketing technique and the playbook that we're using across regions and across maturities of Tier 1, Tier 2 and Tier 3 cities are going to really focus on not only the channels, but also how and what kinds of users we're attracting. The other big thing for us in terms of ecosystem is the algorithm. The algorithm plays a big role in how you experience the product and who you get to see. So we're making investments on our algorithm to ensure that people are getting the best possible match to their intent and where they are in their journey. And so that's another big part of what we're doing. And then the product also plays a big role in the ecosystem, what kinds of experiences that you have from the profile. The profile experience really helps you show up well. It helps you see also people that you may not otherwise consider. So providing more context to the user across the product on how to show up the best possible way, but why you're seeing some of the people that you're seeing being matched with you, help spring users along the journey in a way that feels more aligned to what they're looking for. So ecosystem is all about you finding the best people based on what you're looking for, and it's not only the total makeup of users, but how you experience it.

So just to put a finer point on it, it sounds like when you -- if we tie all that together, there's going to be efforts around user acquisition, make sure you're spending dollars in the correct matter to bring the right user from the top of the funnel down into the platform. And then when someone who's coming on the platform, the tools and the mechanisms they have around onboarding need to set the individual up for success or find out that, that might not be an individual, it could be a bot, it could be something that you don't want on the platform. And then the third step of it is taking that person once they've been on board and they've created their profile and making sure you're creating an ecosystem that creates meaningful connections from that point forward. Is that kind of the 3 step process?

Yes, that's a great way to put it. I would add a couple of things based on what you said. One is that we think our marketing spend dollars so accurate. So this is really about ensuring that we're allocating it right per region. But it is absolutely the 3 steps. And then the last one that you touched on is increasing the safety investments across the company plays a big role in the ecosystem, so bot, bad actor scams, like that's obviously been a big part of Bumble's efforts, but we're actually expanding our investments there because we think we'll play a big role in the customer experience. But those 3 steps are a great way to put it.

So when you think about pulling that all together, what are you most excited about in terms of the product road map as you look out over the next 12, 24 months that you want to execute on to sort of set the application up for where you want to take it?

Yes. A couple of things that I mentioned at our last earnings that certainly I'm excited about. Our focus over the next couple of releases now in the fall and in the winter, it's all about authenticity. Going back to people finding who they're really looking for, but also being able to best express who they are as users in our ecosystem. So we're very focused on expanding, opening moves that's been very successful in terms of adoption and engagement. We think there is even more there to help women find great mattress. But we're also adding additional filters, additional capabilities to help our users search for the types of connections that they're looking for. And in one of the other things that I mentioned at earnings that will really come to life in our winter release is adding AI capabilities that will support our customers. And so certainly, AI photo picker, we want the bar for profile accretion to continue to be high, but we want to reduce the friction that it exists for users. Users have a lot of anxiety in creating profiles. We're going to make that as smooth as possible. So AI for profile creation is a big one. And then the other big factor is customers are much happier and successful and they engage in healthy conversations with each other. So we're going to provide more support for people to enter healthy conversations. So those are some of the early focus on over the next couple of releases that were really prioritizing, again, people really finding each other and having greater success, which is a big part of what we're focused on.

Okay. Really interesting stuff. You touched a little bit on there with AI, and you've talked a little bit about the role that AI can play in online dating, depending on investors you talk to, I think there's either excitement or trepidation around the role AI can play in online dating. Why don't you share your [ wide ] view and how we might want to be able to look for how AI might show up on the platform across different products and different brands in the years ahead?

I've always -- one is the AI in the dating category, like AI has always played a role in the dating category. The matching algorithms are built on AI. So that's not a new thing for this category overall. But what we are really focused on is ensuring that we're getting the right signals from users along the way so that our algorithm is ever evolving based on our users' own evolution. One of the key principles for us as we embrace more and more AI in our products and services is ensuring that AI is not replacing users. And our belief is that AI can [ facility you ] showing up, but we still want users to be themselves. We want them to speak for themselves. And so we have a really clear set of principles. Bumble has long had a stance about people being real, but also responsible use of technology. And so that's going to continue to be the case for us as we think about the set of capabilities we had. The other part that I'm personally really excited about in terms of artificial intelligence is the use of AI for safety capabilities. Safety and trust and bad actor management is something that's always going to exist in any platform or there is people. That's not just for dating, but in general. And so what we want to do is the market-leading platform for customers to know that here they're going to be safe. So we're investing quite a bit on safety and trust so that we are ahead of -- the innovation that fraudulent users will inherently do. So we're really excited about the use of AI for the future innovation here. But again, with the principle that people are meeting real people.

So I want to come back to that topic on user safety and trust. If you were to figure out over the next 12, 24 months, if we would have this conversation a year or 2 years from now, what are you most excited about building around trust and safety that you think can put the platform in a position that you feel very comfortable about for the medium to long term?

One of the things that I'm so excited about, Bumble has had a really long history of building -- been as a technology is coming into the company just seeing the sophistication of our models, the sophistication of visual AI to identify real users on our platform, like it's a very well-advanced part of what we have in our IP. So we're going to certainly going to continue to focus on that. What I'm really excited about as we look at AI broadly, but certainly in safety is just helping users navigate -- protecting themselves and knowing how to be in healthy relationships, a really big part of what we are really all about is healthy and equitable connections. It's a big part of our mission. So we want to make sure that users have the right safety capabilities when they are meeting online, but in person to understand when there are some potential safeguards being crossed and knowing how to get help. So we're certainly laser-focused on that.

Okay. I think the other big investor debate coming out of the last earnings result was really the messaging around monetization and drivers of revenue going forward. Maybe we can start, probably have a few I'd like to ask here. But maybe start with, as you see it, in terms of taking what we've learned so far in this conversation, repositioning the Bumble app, investing in trust and safety, making sure you've got user acquisition and onboarding in the right position. Where does monetization fall into all of that with respect to the Bumble app? And how we should be thinking about the levers of monetization over the medium to long term?

We haven't stopped any monetization efforts. So that's one thing I wanted to very clear about. What we're really focused on is redesigning the value of each one of our tiers. I think when we talked in previous quarters, we talked about how to increase the value of Premium+. But as we look at what our customers' needs are, we want to make sure that the free experience is great, that the base experience is great and make, again, Premium and Premium+ as great. So a couple of key things. we want to make sure that value is really clear that every user gets value, but value is really clear and that users feel a real positive pull for upgrading. So that's what we're focused on. And the positive thing for us is that we have done over the last 9 months of revenue redesign for Badoo. And with Badoo, it was very, very encouraged on making sure that our customers are being successful in that all of the different subscription tiers are focused on a level of success for each one of our users. That's the set of learnings that we're taking to Bumble as we're looking at monetization. And our goals with this effort is twofold. One is ensuring that the top of funnel. So once we -- through our marketing efforts, users get to our app that they have a great experience, that will help that engine and retention drive a greater degree of free-to-paid conversion. So that's one really big push on this effort. The second is increasing ARPPU, especially for mature markets. What we are seeing -- ARPPU continues to be healthy for us. But if we don't get the reignition of the top of funnel and paid conversion, we are seeing kind of the softness that we're experiencing now. So our focus is really free-to-pay conversion, ARPPU growth as we go through this exercise.

Okay. And is there anything you can help in terms of like thinking about how long it took to discern those learnings at Badoo and sort of bringing those learnings into the Bumble ecosystem?

Well, there's certainly different products. So we're being cautious on driving parallels around time line. But certainly, with Badoo, we went through a multi-quarter phasing of this. What we tend to do, and we're already doing with Bumble is testing different designs of subscription tiers in controlled markets, which then allows us to start phasing that across our major markets. So we do expect this as we said at earnings, it is going to be a multi-quarter approach to the phasing as we have seen. And then Bumble is a much bigger product for us than Badoo is. So exact timing, we'll be updating over the next few earnings.

Okay. Understood. When you think about what we've talked about so far with respect to the revenue strategy and the user strategy, maybe bring that back to how your marketing cadence, intensity and focus might change as we go through 2024 and how that sort of framework might change beyond 2024?

Yes. One of the superpowers of Bumble is celebrating women and the second half of the year, we have already done quite a few different fun and exciting partnerships. We are sponsoring the WNBA. There is just an amazing women in sports moment happening right now. Same with the U.S. open, we've hosted a number of different events that celebrates the advancement of great athletes in the sport. What we're seeing is twofold. As we go into these experiential partnerships, and we couple them with actual events on the markets that we're in, we are creating the IRL experiences that users are looking for. And activating them for our U.S. open events, users had to bring a QR code from their app. And so we're really tying the app experience, the particular event and then the social amplification of it all together. And that's been going really well. So what we're -- in parallel to that, so here are some of the brand hero moments for us. But in parallel to that, will you be celebrating the product changes that we're making and showcasing the value proposition to our users, especially in some of our campaigns. So this fall, we're really amplifying the -- as we're launching our update this fall, amplifying the control that we're adding for users, specialty women to control their experience. So women still make the first move with more experienced controls. That's been resonating really well. And then we're going to continue to focus our marketing efforts on authenticity of our customers. Again, we are not expanding the spend on our marketing. What we're really focused on is shifting the spend so that we're very tailored to each market into the particular growth targets that we have for those markets. So in some international markets, we think there is a ton of upside in some campaigns and local, more localized campaigns, digital push in more mature markets, it is a lot more in person and more experiential. And so we'll be more sophisticated in that. As well as we mentioned, I think, at earnings, we're investing on [ MarTech ] Technology as well as more sophisticated analytics. A big part of what we're doing now is as we see signals from a particular market, we can shift our strategy in real time based on what we're learning from our growth targets for that market.

But would it be fair to say, and I don't want to put words in your mouth. If you think about taking a brand like this and putting it as an app back on the path you want to put it on, should it be more real-life experiences and brand advertising over performance marketing? Or how should we be thinking about striking the right balance between performance marketing versus maybe elements of advertising that where you have -- might a little bit more control over your brand messaging and who actually you bring into the ecosystem?

It's a great question. Bumble has always spent more on branded than performance marketing. And in general, that's a healthy thing because when you have more organic traffic based on the brand, users are more engaged higher quality. And that's our goal is to keep a higher spend on brand and experiential overperformance. Performance marketing is very reliable but also the engagement of users are not the most reliable part. And so we want to make sure that we're being balanced on that, especially with ecosystem goals that I mentioned earlier. But Bumble has a great mix on that as of today, and our goal is to kind of maintain that balance.

Maybe just a couple of quick fires on some of the assets away from Bumble. You talked a little bit before about the revenue rebalancing at Badoo. How do you think now about Badoo as potential for growth and where the asset is positioned now coming out of that revenue rebalancing in terms of what your key learnings were and what it might look like going forward?

Badoo is a very tailored product for a user base that's more price conscious. And so that's a positive in which we can have Bumble and Badoo in the C market because we're targeting different users. The learnings there have been incredibly helpful. As I mentioned earlier, we focused on adding value to our users. We shifted some capabilities to lower tier or free, and we're seeing positive conversion as well as ARPPU growth in the business. So we are going to take those learnings. What we have done in general with Badoo is not only the revenue architecture, but even feature innovation because it has a really large customer base. We can test quite a bit at scale very rapidly at a lower risk to the business. So it's a phenomenal innovation engine for us, not only from a revenue perspective, but from a product perspective as well.

Okay. Before we lose you, I want to ask about Geneva and BFF as well. Maybe talk a little bit about how you see some of those assets being positioned not only into the fall, but over the more medium to long term as well as assets inside the portfolio.

Yes. I'm incredibly excited about the opportunity for Bumble in the friendship space. BFF has been a product that we have had with modest investment but a very highly engaged, passionate customer base. And it's a one-to-one product and Geneva is a one to many community based. What we have been doing since acquisition is strengthening the security posture and scale of Geneva, but our goal is to open it up later this fall for gain growth. And what we can do is a number of exciting things. We can use a lot of these marketing in-person events hosted on our own platform and start scaling the growth of Geneva and BFF over time. I think the opportunity there is quite limitless for us, not only can we create an on-ramp for our dating business of usage, but it gives us an opportunity to over time, diversify our business monetization model. So I'm really excited about not only what we can do in terms of customer acquisition, but also the growth of the business over time.

Okay. Maybe last one before we lose you. We've been taken this question a lot lately, but just elements of capital allocation. When you think about $1 of capital where the balance sheet sits at Bumble today, the free cash flow generation power of the business. How should investors be thinking about the priority of capturing organic growth and investing inside the business, potentially diversifying through M&A and driving inorganic growth versus elements of returning capital to shareholders and rewarding folks that want to be sort of alongside you on the equity side for the medium to long term?

For us, our priority right now from a capital allocation is continuing to invest in our organic innovation. As we mentioned over the last couple of quarters, we are reinvesting some of the cost restructuring that we did earlier this year on technology, product and innovation because we see tremendous need in that part of our business. But we also want to continue to invest -- give back to shareholders, we have approved allocation of buyback is our goal to maintain that program and drive aggressively. The second thing is M&A. You mentioned M&A. We just closed Geneva. We will always be open to targeted M&A opportunities that meets our needs to grow the business. We certainly want to invest to grow. But the bar for M&A has to be incredibly high. We want to make sure that it's the right technology, it's the right TAM and opportunity to integrate and execute on the right way. So we'll be strategic in that but organic give shareholder value back to our shareholders and on M&A in that order.

Okay. Last one, just to give you the form of sort of closing us out. We've talked about a lot today in terms of what your key priorities are, maybe just lay them out for investors that are listening, your focus as you exit '24 and going into '25, just to bring together all the themes we talked about today.

I laid out a variable reset in this last earnings, very focused on a comprehensive balancing of 3 major pillars for us, ensuring that we have the best ecosystem and we're balancing our efforts to create a healthy ecosystem, deliver the most innovative customer experiences that will reignite growth for us and ensure that our revenue model is matched to user successful. We have a very sustainable long-term growth. Our focus is executing on that relentlessly. I am -- can't wait to get out of here to go back to work because we're very, very focused on those 3. You all laugh, but it's true. I'm deep on all of them with the team. We are not going to stop until we reaccelerate the growth of this business because we all believe our goal is to be the #1 connections company in the world.

I hope they weren't laughing because you're trying to get away from talking to us. But thank you so much. It was a real pleasure to have the conversation with you. Please join me in thanking Bumble for being part of the conference this year.

Thank you.