Bumble Inc.
Q1 2021 Earnings Call Transcript

Published: 12 May 2021

[Operator:]

Ladies and gentlemen, thank you for standing by, and welcome to the Bumble Inc. First Quarter 2021 Earnings Call . As a reminder, today's program may be recorded. I would now like to introduce your host for today's program, Brinlea Johnson of The Blueshirt Group. Please go ahead.

[Brinlea Johnson:]

Thank you for joining us today to discuss Bumble's first quarter 2021 financial results. With me today is Whitney Wolfe Herd, Founder and CEO; Tariq Shaukat, President; and Anu Subramanian, CFO of Bumble.

[Whitney Wolfe Herd:]

Thank you, Brinlea, and thank you all for joining our Q1 earnings call. At Bumble, we strive to create a world where all relationships are healthy and equitable. We put safety at the core of everything from product and engineering to marketing, and our commitment to our mission is reflected in our strong first quarter results. Our mission continues to be reinforced and resonates in a powerful way as the world has been seeking connection, love, friendship and community now more than ever before, both coming out of the pandemic. And while quarantine still persist around the world, we feel that we serve an incredibly important purpose in helping ease loneliness and helping people find good relationships and community. We are excited with our growth and our continued leadership position in the online dating and connection space. We are motivated by the impact we are having on lives. Caring stories of people finding love, starting families, building friendships or finding community during times of struggle remains our ultimate driving force. We believe that we are just at the beginning of our growth and impact journey. We are just scraping the tip of the iceberg of the addressable market for dating and friend finding around the world and our international growth suggests that our message resonates across cultures and languages. We believe that the friendship space is the next social growth horizon and we believe we are uniquely positioned to be the leader in that category as we've invested years into building a brand and product that women and all genders trust.

[Anu Subramanian:]

Thank you, Whitney, and hello, everyone. Thank you again for joining us. I will start with a review of our first quarter earnings and key highlights and then turn to our outlook for the year. I'm pleased to report that we had a very strong Q1. Total revenue in the quarter grew to $171 million, an increase of 43% year-over-year with total paying users growing by 30% and group ARPPU growing to $19.99, an increase of 13% year-over-year. As a reminder, revenue in Q1 2020 was impacted by $9 million reduction in deferred revenue recorded in purchase accounting.

[Operator:]

Our first question comes from the line of Shweta Khajuria from Evercore.

[Shweta Khajuria:]

This is Shweta at Evercore. Can you please talk about engagement trends? I mean, you touched on this, Whitney, but would love to get a little bit more detail on how you saw engagement and user propensity to pay sort of trend in United States as the economy here was more open than perhaps India or Brazil or Europe? And anything that really stuck out to you, not only in Q1 but Q2 so far? And then the second question is, are you making any -- you talked about pent up demand. So is the impact of the reopen and pent up demand baked into your full year guidance? If so, could you please help us frame that?

[Tariq Shaukat:]

I'll take the first part of the question and then turn it over to Anu for the second part. I think as Whitney mentioned, we are definitely seeing signs of increased engagement in the US as both the economy gets a little bit better and as vaccinations rollout and the health situation improves. We have seen particularly -- we have a large installed base and we've seen a trend up in the reengagement level. So that means users who had opted out during the pandemic starting to come back in, that is definitely fueling the active users that we have on the platform, and that is something that we've seen be very strong in Q1, continue to be strong in Q2. We're also seeing engagement on the platform itself from existing users continue to trend up as well. The number of messages sent, for example, was up about 10% year-over-year in Q1 versus the pre-COVID level. So we're definitely seeing high levels of engagement in the US, improving levels of engagement in the US, more people coming into the market. I think what is still very clear and would, I think, temper those statements is that it is very much a local phenomena. And it really is city by city, county by county, state by state because of just the economic situation. I think you see this not just in our data, but if you looked at what OpenTable publishes around restaurant reservations, how much people are meeting up in person, you're seeing it very, very much by city. We're seeing that same trend. So we are optimistic about things as vaccinations continue to roll out as economies continue to reopen. But it is, I think, still a little touching on exactly when is that going to happen. That's the US point. I think just to probably preempt the question a little bit on globally. We're also seeing very similar trends globally. If you look at markets that are reopening have high levels of vaccination or are reopening in other ways, you are starting to see very positive trends as well. We're seeing very rapid growth in countries like Israel as an example, with a very high vaccination rate. The UK has trended up as they've started to relax the lockdown that they have had in the UK. And so we are definitely seeing that notion of pent-up demand. We do hear from our users that there's almost a historic level of of pent-up demand out there. There is a real need to go out and meet people. People are just trying to figure out when is it going to be safe to do so. And they're taking advantage when they have the opportunity to do that. I think the final point on COVID would be that we are seeing very high levels of engagement now during the pandemic, and we are seeing more people essentially come into the market as these markets liberalize, or probably the wrong word, as they open up somewhat. And so we do believe that the engagement gains that we have seen through the pandemic are continuing to be sticky and will hopefully continue to play well for us as markets open up. Anu, do you want to take the second part?

[Anu Subramanian:]

In terms of the second question around what is built into our outlook. Like I said earlier, what we've included today in our outlook is a realistic reflection of what we expect to happen in the second half. As we have said before, we have international expansion plans that are built into our forecast for this year. And that's what you see reflected in the numbers. Just as a reminder, we had an extremely robust second half in 2020 and our growth rates, for example, in Q3 and Q4 were close to 30%. So as you think about year-over-year growth rates for second half of '21 versus '20 that is also an important fact to take into account.

[Operator:]

Our next question comes from the line of Nick Jones from Citi.

[Nick Jones:]

I guess could you maybe drill down a little bit into the nondating solutions, the BFF. Sounds like is there an incremental investment, it's maybe more than we kind of thought from last quarter. And then I thought comment on next generation consumables was interesting. Could you expand a little bit more on that opportunity?

[Whitney Wolfe Herd:]

So friendship is a huge opportunity, as we discussed earlier, and it has not been tapped yet, not even to the degree of where we believe it will go. If you think about where online dating was back in, call it, 2012, the demand is there for community in friend finding. And we've seen that just by way of the daters our product, looking for friends in this authentic and organic way. So when we talk about the investment we're making, first and foremost, we're doing a product relaunch, a major product relaunch that is currently in the works. And we cannot disclose too much more information as it is currently being worked on. But we really fundamentally believe that once the product is in a place that it is, A, tailored and designed to be used for front finding in a seamless way and is really reinvested in properly and then marketed in line with that, we think that we are going to see a huge surge in those coming to find platonic connections. So as far as investment in this goes, we cannot disclose any more details, but I can tell you it's a high priority for us internally across all of our teams.

[Tariq Shaukat:]

And then the point on consumables, there's a couple of different things going on here. The first is that we do recognize that as a premium app, there's a psychological barrier almost to getting people to consider us to be a paid experience as opposed to just a brief experience. And we do believe, particularly in some countries in Asia as well as in other parts of the world that a consumable based model as a gateway into the subscriptions is really important and will drive up subscriber rates over time. And so part of the consumable strategy that you're hearing us talk about is really anchored in that notion. I think the second is that we do believe that there are elements of the experience that we can add to by offering new value added services that just don't lend themselves to a subscription type of model. We already have SuperSwipes, as an example, in the product where you can swipe to increase visibility. We think there's other fun playful ways that you can also make yourself stand out just a little bit more in in the experience. And so we're in testing on both Bumble and Badoo around a range of those different opportunities. We think those would add both ARPU, and as I say, over time, we believe, also add to subscriber rates growing as well.

[Operator:]

Our next question comes from the line of Cory Carpenter for JPMorgan.

[Cory Carpenter:]

I will cut my question down to one. So just hoping you could talk more about Bumble app product in general. Certainly, I want to hear about the premium tier, how the rollout is going or the adoptions relative to your expectations and the type of ARPU and renewal rates you're seeing? And then also just beyond premium, the broader product road map and your plans for the rest of the year?

[Whitney Wolfe Herd:]

Anu is going to take the first half of that question, and then I'll jump in on broader product plans.

[Anu Subramanian:]

So with respect to Bumble Premium, as we said, we started to launch Android across the globe and we've launched it in four countries so far. I'd mentioned last time we spoke that we saw strong adoption in November and December when we launched in iOS. We've seen similar numbers for Android as well. So we continue to be pleased with how the rollout is going. Obviously, we still have a long way to go in terms of finishing our rollout. So more to come on that as we go through that this year.

[Whitney Wolfe Herd:]

And then as far as broader product rollout, we are really looking and listening to the customer. This is fundamental to us. We are asking the customer, what do you want out of this experience. And life has evolved over the last year and half with this pandemic and needs have changed. And so continuously reinvesting in the transition from the stay at home life to going back to IRL dating and really making sure that we are at the forefront of engineering a safe, accountable but also seamless experience, and allowing people to tailor what they're looking for and to be really granular on the customer. So an 18 year old is looking for something very different than a woman in her mid 50s might be looking for. And so the future of Bumble product is to be really tailored to the customer and to give them what they're looking for from the experience. I think one of our strengths is that we really listen to the customer. This is something we spend a lot of time on and this is what we'll continue to guide us as we evolve our product features and road maps going forward.

[Operator:]

Our next question comes from the line of John Blackledge from Cowen.

[John Blackledge:]

I think one of the big expansion initiatives for Bumble app is to non-English speaking markets, growing that penetration. Just curious if you can provide any color there on how that was going.

[Tariq Shaukat:]

So as you mentioned, for Bumble, we have really been emphasizing expansion into Western Europe for the first quarter and continuing in the second quarter. We are seeing, as Whitney and Anu mentioned, tremendous growth, not just in Germany but in the whole region of Europe to the German speaking markets, we are seeing very, very strong growth in the triple digits year-over-year. In France, continuing very strong growth in the Benelux region as well. And in parts of Northern Europe, we're continuing to accelerate our investment there as well. So as we think about the non-English speaking markets in Europe, we're very, very pleased with the progress that we're seeing, both in the monthly active users as well as payer penetration in those markets. We are also continuing to invest and see -- into pockets of Southeast Asia, we are seeing very strong active user numbers out of markets like Indonesia and the Philippines, we're seeing Also very strong growth out of areas in Latin America, like Mexico, like Brazil. And so we really do think that the first quarter and what we're seeing so far in the second quarter are continuing to highlight the fact that the Bumble value proposition really is not just in English speaking markets phenomenon, but really does apply in both Western Europe and Southeast Asia, including in majority Muslim countries like Indonesia and in Latin America. So we're very happy with that and we'll be continuing our investment there.

[Whitney Wolfe Herd:]

And just to add one final note on that. I think this just really goes to show what we've been saying for years. Women universally are looking for healthy, respectful and equitable connections relationships. And the brand we have built resonates around the world as does the product. And this is really being proven, as Tariq suggested, in a bevy of countries and we're super excited about the runway ahead of us. And again, we're very early in our international growth story, and that's definitely something we're incredibly excited about as the quarters continue.

[Operator:]

Our next question comes from the line of Lauren Schenk from Morgan Stanley.

[Lauren Schenk:]

Just wondering if there's sort of any incremental color you can give on how we should think about Bumble apps versus Badoo revenue within the second quarter guidance, and then sort of within that paying user versus ARPU trends for the Bumble app?

[Anu Subramanian:]

So I think the way -- I'll start with the second part of your question first. I think we've said for both Bumble and Badoo growing paying users is a huge area of focus for us. So for both of these apps, we will be doing a lot of work from a product perspective to improve our payer penetration and consequently increase paying users. So that is definitely something that is ongoing in Q2 and is reflected in the numbers that we are looking at. In terms of ARPPU, obviously, bumble premium is still to be launched in Android in many parts of the world. So that is definitely something that we expect to impact our people for Bumble in Q2. For Badoo I think we don't have any big ARPPU initiatives that are planned for Q2. But for Bumble, certainly, the growth is focused.

[Operator:]

Our next question comes from the line of Deepak Mathivanan from Wolfe Research.

[Deepak Mathivanan:]

I wanted to ask about customer acquisition. The advertising pricing seems to be increasing pretty high in various channels, obviously, as many sectors start to come back. But for you guys, I know you have a high organic traffic mix. But how was your paid marketing strategy changing right now, if at all? And then how should we think about the levels of marketing spend for the rest of the year?

[Tariq Shaukat:]

As you mentioned, a lot of our customer acquisition, almost 80% or so of our new customers comes in because of organic means. And so that would be word of mouth, our brand activities or influencer activities, that sort of thing. And so that in part does insulate us from the ad increases that you are seeing in a number of channels out there. So that is something that we think from a strategic standpoint, we're continuing to lean into. We have a very nimble marketing team on the performance marketing side, it's a little complicated with the rollout of iOS 14.5 and the IDFA changes that are happening right now. It's too early to tell what impact we're seeing from that, but we are keeping a close eye on it, and I think we'll be shifting channels as we get more data coming out of that. So there's really no material changes at the moment that we are -- doing beyond the day-to-day optimization, but it's still quite early to tell with some of these changes that Apple is rolling out and what the impact of that is going to be.

[Operator:]

Our next question comes from the line of John Egbert from Stifel.

[John Egbert:]

So as you roll out Bumble Premium across new international markets, have you been tinkering with price points and/or feature sets for the premium memberships as you gauge the receptiveness from users in those markets? And just as an extension of that, like do you, in general, see noticeable differences in demand for specific premium features or consumable items when you look at one market versus another?

[Tariq Shaukat:]

So certainly, the focus at the moment is rolling out premium as a package globally. And we do, I think to use words to tinker with the price point, to just understand what is the elasticity in any given market, what's the willingness to pay in different markets, that sort of thing. We have a pretty constant optimization effort around that geared towards optimizing revenue, not payer penetration or ARPPU per se. But that is work that our revenue team does day in and day out, and it is more focused at the moment on the price point and payer penetration optimization, not as much on the feature set. I do think that part of the consumable strategy that we talked about earlier is to give a little more flexibility by market because we do see different markets where the behavior is different. And to use perhaps slightly off topic example, but we do know in some markets like India, as an example, BFF is a strong on ramp into the date product. And so there are different products that we believe we can offer there to make the on ramp into online dating, just easier versus a market where it's more normalized like in the US. And so we are probably looking at the consumables more for that feature set tinkering than the subscriptions themselves right now.

[Operator:]

Our next question comes from the line of Dan Salmon from BMO Capital Markets.

[Dan Salmon:]

Whitney, one of the strengths of Bumble has always been whole position in safety and trust amongst dating applications, whether it was first message for women, photo verification, lots of different things. Now we see your competitors investing a little bit more heavily in this area, another public company disclosing $100 million invested in this area earlier. Do you believe safety and trust is becoming more table stakes at this stage and is your traditional differentiation here more or less important going forward?

[Whitney Wolfe Herd:]

And thanks so much for the question. I'm glad you asked. This is so important to us. So a little bit like a brand, trust and safety have to be incredibly genuine, authentic and foundational. And I'm certainly not putting anybody down, I'm just highlighting our strength here. And from day 1, everything we have done has come with a certain requirement and that is safety, that is protecting the women customer and inherently protecting all customers. This has been so core to the way we have engineered the product in every feature from day one that it is just seamless and it's natural and it's authentic. And so we don't need to carve out a certain bucket of investment to go and add this on top of our foundation, this is what we do. Every investment we make is safety. Everything we do is about protecting the customer, fighting for equality and fighting for a kind or more accountable ecosystem environment and Internet. And when it's authentic and natural, it doesn't have to be an additional investment. It's just part of our daily process. And so I think what you'll see moving forward is just more from us. Every move we make, every road map we put out there, every marketing agenda we have is rooted in kindness, accountability and safety and this is why our brand is our brand. And that's ultimately to one of the earlier questions about the marketing mix, the payer mix on advertising and organic. This is why bumble grows organically because we have trust from the customer because we have done this from day one, and it's who we are.

[Operator:]

Our next question comes from the line of Steve Koenig from SMBC.

[Steve Koenig:]

So this is the quarter that we are starting to see your ARPPU pickup versus the growth last year was driven all really by paying users. Can you just give us more color on some of the things that are helping that and kind of what you expect? And is most of that, the Bumble Premium tier or are there other things that are helping there as well?

[Anu Subramanian:]

So yes, absolutely. I think Bumble Premium, we launched it in Q4 of last year and it has been a standard product for us. It has been -- for now, it is definitely an ARPPU play for us. We've talked often in the past about how we would like for that to become an enabler for getting more people into the funnel. But right now, we are very focused on ensuring that people that are on our lower price tier, which was called Bumble Boost are now moving to the Bumble Premium. And more than two thirds of our customers today are on bumble premium, and that is really what you see reflected in the ARPPU numbers that you see.

[Operator:]

Our next question comes from the line of Mike Ng from Goldman Sachs.

[Mike Ng:]

I was just wondering if you could provide your latest thoughts on the future of mobile platform fees. And could you just remind us what you're assuming for changes to the Google Play store in the guidance?

[Anu Subramanian:]

So we are continuing to have discussions with Google about the proposed Google Play change, which is expected to happen in Q4 of this year. And our conversations are still ongoing and things are still fluid in terms of what that would actually look like once we get to October. So we'll provide more details in terms of specifics as we have them. Our current guidance does assume on the lower end that any impact from Google Play, it does builds in -- it has built in the impact from Google Play.

[Operator:]

Our next question comes from the line of Brent Thill from Jefferies.

[Brent Thill:]

Anu, on just the guide, I think there's a lot of questions. You had 43% growth in Q1, yet you're guiding the full year to 25%. I think we all recognize the back half of the year gets harder. But when you beat by $6 million and you raise the guide by $8 million and given the overall demand environment is improving, I think everyone is just trying to understand, is there something that's happening that you're not seeing fall through, because I think many would think that environment’s opening and you can hear in the tone of everyone on the call that things are better. But why not the fall through in terms of your overall view for the back half of the year?

[Anu Subramanian:]

Like I said in my remarks, I think our outlook reflects our current view of what we are seeing. We are staying cautiously optimistic. I think like Tariq mentioned earlier, there isn't always a perfect correlation between when a market opens up and when people actually start engaging actively in the dating ecosystem. So things are still pretty fluid across many markets. So we just have to sort of see how things go. We feel good about where Q2 is and that's reflected in the guide that you see here for Q2. And like I said earlier, Q3 and Q4, we do have difficult comps just given the phenomenal growth we had in the second half of 2020. And we start lapping a lot of monetization features that we rolled out starting in Q2 of 2020. So that is the reasoning and thinking behind the numbers that you see in front of you today.

[Operator:]

And our final question for today comes from the line of Andrew Marck from Raymond James.

[Andrew Marok:]

On Badoo specifically, can you talk about the drivers behind the ARPPU growth in 1Q? If there's anything specific to call out there? And just in general, how you're thinking about product innovation and pricing optimization or monetization for Badoo specifically.

[Anu Subramanian:]

Tariq, do you want to start with the product…

[Tariq Shaukat:]

I think the important thing to note, and about Badoo is that we believe the Badoo user is typically more middle class and emerging middle class user around the world, and we do believe that they have been economically more impacted by COVID than the average bubble user, as an example. And so we do see that in different parts of the world, we are seeing that that Badoo user be more challenged, both economically that gets into appetite to pay, et cetera, that we're seeing on Badoo. I'll let Anu speak specifically to the trends that we have there, again, with the testing that we have on consumables is to make sure that we've got lower price point on ramps for people in some of those markets to start having that value added experience without necessarily having to opt into the full subscription on day one. And so that is certainly a piece of it. I think as we think about the Badoo value proposition moving forward, where we're leaning in with the product, it very much is anchored in this notion that as the economy gets better, as the health situation gets better in a range of different markets, a lot of the users are already out there. They are, in many cases, essential workers, they are people who are out and about, but they are trying to meet people. They're trying to burst out of this area of loneliness. And so the value proposition around location around speed of contact, around the ability to connect seamlessly and easily is something we're really leaning into. We think that serves a really unique need. in the market, particularly in these times when a lot of our users on Badoo feel in their work stressed and stretched, and a number of different things like that and mostly. And we're trying to make sure that we have that low stress environment where they can again connect quickly and easily with somebody as to diverse out of that circle of loneliness. And Anu, do you want to speak to the next piece?

[Anu Subramanian:]

And in terms of the actual ARPPU growth, I think there is a little bit of the benefit of the deferred revenue from last year that is reflected in those numbers and you see that. And then I think the points that Tariq made around optimization work that we're doing with consumables, especially in some of the Badoo markets that are less hit by COVID, like, for example, Russia, where consumables -- we're tweaking it on with our products there. So that is what you're seeing in our ARPPU numbers reflected.

[Operator:]

Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the question-and-answer session as well as today's program. Thank you for your participation. You may now disconnect. Good day.