Q2 2023 Bumble Inc Earnings Call
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Hello, and thank you for joining by both conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session to ask a question. During this session simply press star followed by the number one on your telephone keypad I will now hand, the conference over to Cheryl balance whaler Vice president of Investor.
Relations. Please go ahead.
Thank you for joining us to discuss on both second quarter financial results with me today are waiting we won't hurt founder and CEO part chocolate President and new Supermodel <unk> CFO .
Before we begin I'd like to remind everyone that certain statements made on this call today are forward looking statements.
These forward looking statements are subject to various risks and uncertainties and reflect our current expectation based on our beliefs assumptions and information currently available to us.
While we believe these expectations are reasonable we undertake no obligation to revise any statement to reflect changes that occur. After this call description of the factors and risks that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our earnings press release and filings with the SEC, including our annual.
Our report on Form 10-K for the year ended December 31, 2022, and our subsequent periodic filings.
During the call. We also refer to certain non-GAAP financial measures.
non-GAAP measure should be considered in addition to and not as substitutes for or in isolation from our GAAP results.
Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at IR Dot Bumble dot com and with that I'll turn it over to Michael.
Thank you Sheryl and good afternoon, everyone. Thanks for joining our call today, our second quarter results demonstrate the strength of our apps and our solid execution on our goals for the year, we delivered a strong quarter with better than expected revenue growth accelerating paying users and robust profitability total bubble ink revenue of $260 million was up eight.
18% year over year, driven by bumble off revenue growth of 23%. Our total paying users increased 20% to reach $3 6 million and adjusted EBITDA was 67 million, representing a 26% margin.
With loneliness is on the rise globally to the point that has been declared an epidemic in the U S. There is considerable room for each of our apps to grow and have significant impact on People's lives. We have a well constructed portfolio of apps to bring people closer together within dating we have an extensive global footprint, where we have at least.
One top three app by download Sharon in over 50 countries. Our focus is on continuing to drive market share gains opening additional new markets and driving further depth of engagement and payer penetration.
Let me provide an update on each of our up I'll start with Bumble off Q2 revenue grew 23% to 208 million driven by continued momentum in paying users from Q1 to Q2, we added 139000 payers a significant acceleration from the 98000 net adds we reported last quarter the broken.
Paris was fueled by strength in top of funnel metrics, including new and re engaged users, reflecting the overall health of bumblebee ecosystem and our continued payer optimization effort.
As we've discussed previously bundle apps business model is built around generating durable growth, we focus on building preference, particularly with women for our brand and our product, which in turn drive strong word of mouth downloads and high engagement.
This deliberate with distinct growth quarter after quarter and it's sustainable as we scale. The results are clear our core markets continue to grow fueled both by new registrations and re engaged users our newer markets in western and southern Europe and key markets in Latin America also continued to perform well on the product side.
I'm proud of how well our team is advancing our vision and roadmap. Let me begin by updating you on some of the initiatives. We've discussed previously first complement our message before match feature continues to ramp in both usage and revenue contribution its unique value proposition has landed well with early adopters.
This feature is driving improved brand perception and engagement as complements recipients are 70% more likely to get them matched we're continuing to invest in the experience to drive greater awareness and adoption. We are also excited with the traction of that to be our new feature that leverages. The power of our new AI algorithm to cure.
Match recommendations for users we were pleased with our initial top decided in mid Q2 to accelerate our rollout that was added to a bundled premium subscription tier in late may and it's now available worldwide.
Early indicators have been positive and after bundling that feeds into bumble premium we've seen uplift in both new subscribers and renewals. We also see by these improving chat initiation rate.
That's b is also illustrates the practical and powerful way as we are employing AI to improve our customer experience as I said last quarter, well AI is already cortez several initiatives, including the recommendation and personalization experience as well as our safety effort. We are now exploring opportunities to bring generative AI.
Into our users' experience.
A few example provides.
Providing interactive advice on improving and curating profile enhancing the relevance the incompatibility of matches and preventing toxic behavior overall gen AI will be a catalyst and reducing friction and pain points along the dating journey.
The start of the year I talked about the foundational engineering work, we've done that enables us to be more flexible with our subscription and consumable offering but we will have successfully grown revenue primarily through two subscription tier bubblegum and bumble premium with the majority of our paying users on the higher priced tier two years since the introduction of premium.
As we look at the needs of our users on our service. It is clear that there are opportunities to further expand our subscription offerings on both ends of the pricing spectrum.
We are continuing to test a base subscription tier to create a differentiated experience and more affordable offering that will appeal to jive with the member base.
Based on our high quality user base, we have conviction that there is also demand for a higher priced product above bumble premium. We believe this higher tier will appeal, it and provide value to existing bundled members with more serious dating intent. We expect this will also resonate with singles who are not currently using dating app.
Because they desire a more curated experiences we will start testing this product later this year.
Bundled product momentum is supported by marketing that showcases our brand and mission. According to morning, consult Bumble continues to retain the top net promoter score among dating apps for women in the U S and this favorable brand awareness translates into valuable customer acquisition opportunities and makes us a highly.
Taught out marketing partner I'd like to highlight a couple of recent examples of our marketing team is great work in late June we launched summer of kindness, our global integrated marketing campaign built around our feature launch of complements the campaign centers around the power of kindness, which is engineered into the bundle.
To highlight this we rolled out a film called kindness as sexy as well as outdoor as partnerships and Influencer campaign spreading complements around key cities.
Last month, we also kicked off a category exclusive partnership with Barbie the worldwide number one movie of the summer via a 360 global co marketing campaign, where we encouraged users to have the best day ever by receiving motivation from the film many Barbie and Ken characters to send complements on bumble.
We were the only dating app to garner a partnership with Barbie, which is another great example of our strong and differentiated brand.
The feedback from both of these launches has been overwhelmingly positive and I'm proud of how well they represent bubbles mission and values.
Now turning to Baidu, Baidu App and other revenue totaled $52 million in Q2 up 2% year over year.
This is the first quarter of year on year growth for Baidu since the first half of 2021 I'm excited to produce turnaround plan is having the desired impact and the business is on a good path to stabilization on the product side, we've been modernizing the app minimizing friction in the user experience and providing our members with.
New ways to interact that are more in tune with the post pandemic environment. These efforts have begun to bear fruit with strong new user growth in most of our markets alongside improvement in engagement trends.
Monetization continues to improve as well with sequential paying user net adds of 34000 and several of the top markets returning to positive revenue impair growth. This quarter, we plan to build on this momentum in the second half with a brand refresh and continued innovation on its core discovery mechanics to help people instantly.
We connect with the most relevant matches for them.
Bruce also continues to scale and launched in the U K a meaningful first step in expanding beyond just based on the French speaking market early results have been promising, particularly with Gen Z adoption and engagement and we plan to introduce fruits in more markets in the coming months.
A key part of our broader growth strategy is to strengthen the ecosystem of connections, whether it's new relationships established couples or friendships.
Part of my original vision for Bumble has always been building relationships beyond dating we believe there is tremendous opportunity in this expansion. We recently took two important steps towards building out that vision.
First we acquired official in App that strengthens existing relationships by providing date ideas mood check ins and other features or couple official is available in 45 countries and has been downloaded more than 1 million times. Since it was launched official helps relationships, but start I'm humbled that.
Do fruit or anywhere else maximize their full potential this opportunity can increase the lifetime value of our customers and open up broader lifestyle business Adjacencies.
Second I'm thrilled to announce that our new and Standalone BFS App Bumble for friends is now live in several countries, including the U S.
The App is built to create a new way for people to discover meaningful kind and funnel friendship and their local area. It maintains what people have loved about BFS and adds a new easier way to plan group activities. We're launching at an opportune time with more people open to making friends online than ever before.
In a recent bubble for friends survey two thirds of Gen Z respondent shared that making new friends online lessen their loneliness and we are uniquely positioned to make a difference in this space. We have seen strong early results with the new App.
Gen Z engagement as a particular stand out by the end of Q2, our youngest BF apps users were spending 34% more time per week in the app compared with the equivalent in BFS mode cohort over the next several quarters will continue to invest into the experience based on member feedback will also begin to.
If things several paths for monetization, although we don't expect material revenue contribution this year as we prioritize the user experience.
In summary, it has been a productive and rewarding first half of the year as a company we've been very customer centric nimble and decisive we have achieved substantial progress on the product front, we are executing well and we are continuing to deliver on our strategic priorities our strong for.
Half positions us well to achieve our goals across our growing family of apps for the balance of the year and into 2024 before I conclude I would like to take a moment to thank tarek for all of his contributions to the company. He has been a great leader and we wish him the best in his future endeavors. Thank you Tara.
And of course deep gratitude and thanks as always to team bumble for their unwavering commitment and hard work and support of our mission and to our customers partners and investors for their continued trust and support and with that I will turn it over to a new for a discussion of our financial results and outlook.
Thank you. Thank you Whitney and good afternoon, everyone. Our second quarter results demonstrate the unique appeal of our App and the strong execution of our team total revenue growth was robust driven by product initiatives and international expansion and Bumble App and continued progress towards stabilization of Purdue.
On the expense side, we continue to operate with discipline around spend driving strong free cash flow, while investing in the long term strength of our app.
I'll walk you through our second quarter results before turning to our outlook for Q3 and full year 2023.
The stated otherwise all comparisons on a year over year basis.
Total bundle ink revenue in Q2 was $260 million up 18% year over year and above our outlook total paying users reached $3 6 million up 20% with both bumble and baidu pairs, showing sequential and year over year growth total our people was $23 in 'twenty.
<unk> down 1%.
Revenue from Bumble App was 208 million up 23% Bumble op revenue growth was primarily driven by a 28% increase in paying users to $2 5 million on a sequential basis, we added 139000 paying users in Q2.
Paying user growth was driven by strength in active users and solid improvements in payer penetration.
Bumble apps are people was $28 in 'twenty, one and down 3% year over year and up 1% sequentially. The year over year decline was primarily driven by geographic mix shift.
Now moving on to Baidu, App and other Baidu App and other revenue was $52 million up 2% year over year.
Madhu App and other paying users excluding <unk> grew 7% to $1 2 million on a sequential basis paying users grew 34000 in Q2.
But do App and other are people, excluding fruit declined 5% to $12 83, and primarily due to pricing optimization and geographic mix shift.
Turning now to expenses, we continue to operate with discipline and efficiency.
While we are focused on investing in our apps to bring our brand to the market around the world. We are also managing incremental spending and head count carefully and we remain committed to expanding margins, but this fiscal year and beyond.
Total GAAP costs and expenses were 239 million for the quarter on a non-GAAP basis, excluding stock based compensation and other noncash or onetime items, our total non-GAAP costs and expenses were $193 million up 17%.
Cost of revenue was 76 million and grew 25% as a percentage of revenue cost of revenue was 29% versus 28% in the year ago period.
We have now largely lapped our compliance with the Google play store mandate, which began in April 2022.
Sales and marketing expenses grew 12% to 64 million. This represents 25% of revenue versus 26% in the year ago period, we remain diligent in our allocation of marketing spend and continue to see opportunities for leverage in particular from our brand marketing piece.
G&A expenses were $29 million or 11% of revenue compared to $29 million or 13% of revenue last year.
<unk> development expenses were 24 million or <unk>.
9% of revenue versus $17 million up 8% in the year ago period.
Investment in product and technology is a critical driver of our growth, but we maintain a high bar for net head Count addition.
Q2, GAAP net earnings were <unk> 9 million compared to a net loss of 5 million in the year ago period Q.
Q2, adjusted EBITDA was $67 million up 23% and above the high end of our outlook range and represented a 26% adjusted EBITDA margin.
Now turning to the balance sheet, our cash position remains strong as we drove free cash flow of $40 million in Q2.
We ended the quarter with a cash and cash equivalent balance of $381 million. Our total debt position was 623 million of which just $6 million is due over the next 12 months.
Our strong cash flow has enabled us to return excess capital to shareholders.
Last quarter, we announced that our board authorized 150 million share repurchase program and in Q2, we repurchased one 3 million shares for a total of 21 million.
Now moving onto our financial outlook for Q3 and full year 2023.
We are pleased with the results we achieved in the first half of the year and remain confident in our ability to deliver within the previous full year outlook ranges for revenue and adjusted EBITDA.
For Q3, we expect the following total revenue between $274 million and $280 million, representing a growth rate of 19% at the midpoint of the range, we expect bumbalough revenue to be between $221 million and 225 million.
Entering a growth rate between 22% and 25%.
43% and 24% are.
[noise] bumble out, but I have a new outlook includes expectations for fully isn't it odd of approximately 510000 to 525000.
But adjusted EBITDA, we maintain our expectation of at least hundred basis points appeared over your margin expansion.
In closing, we believe our business remains as strong as ever and we continue to see momentum across our app. The authentic focus unkind connection, which is a hallmark of our offerings differentiates us in the marketplace and has demonstrated in <unk>.
Our team is operating with discipline and purpose to deliver value for our users while the cap sitting the tremendous opportunity that we envision for a brand.
Thank you for your continued support.
With that operator, we can open it up for Q&A.
As a reminder to ask a question simply press star followed by the number one on your telephone keypad and will pass for just a moment to compile the queuing day roster.
Our first question will come from the line I'm Alexandra Tiger with Goldman Sachs. Please go ahead.
Great. Thank you for taking my questions. So maybe one for Whitney and wonderful I knew giving you a recent acquisition of official and the launch of Bumble for friends cause you guys had little deeper into your longterm vision of bumble evolving into an ecosystem of fluff and what that could mean in terms of like future peer growth conversion opportunities and retention.
Dynamics and then for a new I know, it's too early to talk about 24, but how should we think about kind of like a normalized growth rate beyond twenty-three. Thank you so much.
Yeah, Hi, I'll start. Thank you so much for the question. So as we said from day, one bumble has always been about kind connections at large we obviously put a huge focus on romantic relationships and dating but when you look at a person's life of relationships dating is.
Just one part of that and we really want to be there with with someone on their entire relationship journey and so if you really look at this relationship spectrum, we want to be with you not just when you meet your partner, but then as you go off of the dating App and you then have a new relationship we want to stay with.
You through that whole journey and when you look at these relationships from a romantic plans were just talking about official right now they are cyclical most of these relationships in your twenties and your thirties and even beyond they don't last forever always and so we're with you when you find love and then as you build that relationship together and then it really does turn into a <unk>.
Cycle to come back into the dating ecosystem, whether that be bumble or do or.
Excuse me, ladies and gentlemen, this is the operator I apologize, but there will be a slight delay in today's conference. Please hold and the call will resume momentarily.
Hello May I have your name please.
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