Bumble Inc. 2020 Form 10-K Summary
Business context and reporting period
Bumble operates the Bumble and Badoo freemium dating and social networking applications, monetized primarily through subscriptions and in-app purchases, with limited advertising and partnership revenue. The filing covers the fiscal year ended December 31, 2020, but results are presented as a Successor period from January 29 through December 31, 2020 and a Predecessor period from January 1 through January 28, 2020 following Blackstone’s January 29, 2020 acquisition of Worldwide Vision Limited. Accordingly, Successor and Predecessor results are not fully comparable.
Bumble Inc. was incorporated in October 2020 as a holding company and completed its IPO on February 16, 2021. The IPO is a subsequent event and is not included in the December 31, 2020 financial statements.
Financial and operating highlights
| Metric | Successor period Jan. 29–Dec. 31, 2020 | Predecessor Jan. 1–Jan. 28, 2020 | 2019 |
|---|---|---|---|
| Revenue | $542.2 million | $40.0 million | $488.9 million |
| Bumble App revenue | $337.2 million | $23.3 million | $275.5 million |
| Badoo App and Other revenue | $205.0 million | $16.7 million | $213.4 million |
| Net income (loss) | $(110.2) million | $(32.6) million | $85.8 million |
| Net income (loss) margin | (20.3)% | (81.4)% | 17.6% |
| Adjusted EBITDA | $143.1 million | $9.4 million | $101.8 million |
| Adjusted EBITDA margin | 26.4% | 23.4% | 20.8% |
| Operating cash flow | $56.3 million | $(3.3) million | $101.4 million |
| Free cash flow | $45.6 million | $(4.4) million | $91.7 million |
The Successor period included $15.0 million of purchase-accounting-related deferred revenue reduction. Net loss was also affected by transaction costs, acquisition-related amortization, stock-based compensation, interest expense and foreign-exchange losses. Adjusted EBITDA excludes several of these items and is not a GAAP measure.
- Total Paying Users increased to approximately 2.5 million in 2020 from 2.1 million in 2019, comprising approximately 1.1 million Bumble App Paying Users and 1.4 million Badoo App and Other Paying Users.
- Bumble App Paying Users increased 33.5% versus 2019; Badoo App and Other Paying Users increased 14.1%.
- Total ARPPU declined to $18.89 from $19.22. Bumble App ARPPU declined to $26.30 from $26.84, while Badoo App and Other ARPPU declined to $12.69 from $13.77.
- International revenue represented 44.3% of Successor-period revenue.
- Cash and cash equivalents were $128.0 million at December 31, 2020, compared with $57.4 million at December 31, 2019.
- Total assets increased to $3.64 billion, primarily reflecting the acquisition. Goodwill was $1.54 billion and net intangible assets were $1.81 billion at year-end.
Material changes versus the prior comparable period
- The January 2020 Sponsor Acquisition created the Successor reporting entity, added substantial goodwill and acquired intangible assets, and materially increased depreciation and amortization.
- Revenue for the Successor period exceeded the full-year 2019 amount, but the periods are not directly comparable because 2020 is split between Predecessor and Successor reporting periods.
- Bumble became the primary growth contributor: Successor-period Bumble App revenue was $337.2 million, compared with $275.5 million for full-year 2019, while Badoo App and Other revenue was $205.0 million versus $213.4 million in 2019.
- Operating loss for the Successor period was $74.4 million, compared with operating income of $93.3 million in 2019, primarily reflecting $91.8 million of depreciation and amortization, $66.3 million of transaction costs, higher personnel costs and a $27.8 million increase in the fair value of contingent earn-out liability.
- The company incurred $22.1 million of interest expense in the Successor period versus $0.2 million of interest income in 2019 because of acquisition financing.
- Operating cash flow and free cash flow remained positive in the Successor period but declined from 2019, reflecting the net loss and transaction-related effects.
Debt, liquidity and capital structure
- At December 31, 2020, term loan principal was $845.0 million, with carrying-value debt of $826.2 million net of issuance costs and current maturities. The term loans mature January 29, 2027; a $50.0 million revolving facility matures January 29, 2025.
- The term loans carry variable interest rates. The reported rates at year-end were 2.95% for the original term loan and 3.75% for the incremental term loan. Interest-rate swaps fixed the variable-rate component on $350 million of debt at 0.4008% through June 2024.
- Management stated that it had sufficient financial resources to fund operations and business plans for the next twelve months. The company reported compliance with debt covenants at December 31, 2020.
- The 2021 IPO generated approximately $2.36 billion of net proceeds. Proceeds attributable to 9.0 million shares were intended to repay approximately $200.0 million of term debt and fund general corporate purposes; other proceeds were used to purchase or redeem shares and units from pre-IPO owners.
- The post-IPO tax receivable agreement requires Bumble Inc. to pay certain pre-IPO owners 85% of realized or deemed-realized tax benefits. Estimated future payments related to the offering transactions were $520.9 million, while estimated immediate termination payments were approximately $1.22 billion, subject to assumptions and potentially material variation.
Guidance, outlook, management commentary and risks
The filing does not provide quantitative forward guidance. Management expects to continue investing in technology, marketing, product innovation, machine learning, safety, privacy and security while seeking to balance growth with long-term margins. Growth initiatives include increasing paying users, expanding Bumble into new international markets, using Badoo’s footprint to support expansion, and developing Bumble BFF and Bumble Bizz.
- COVID-19 created uncertainty regarding user demand, users’ ability to pay, employee productivity, international expansion and access to capital. Management stated that the full future impact could not reasonably be estimated.
- Apple and Google distribution and payment policies are significant risks. The filing notes that app-store fees are generally about 30% of applicable in-app transaction revenue and warns that Google Play billing requirements could adversely affect revenue or distribution.
- Competition is intense, switching costs are low, users commonly use multiple dating applications, and larger social-media or technology companies may have greater resources.
- Privacy, data protection, cybersecurity, content moderation, age verification and online safety requirements are complex and rapidly evolving across jurisdictions. The filing states that the company may not always be in technical compliance with all applicable laws.
- Foreign exchange risk is significant because international revenue represented 44.3% of the Successor-period total. LIBOR discontinuation could also affect variable-rate debt costs.
- The company reported a material weakness in internal control over financial reporting relating to insufficiently defined information-technology controls. Disclosure controls and procedures were ineffective as of December 31, 2020, although management concluded the financial statements fairly presented the company’s results.
- Legal provisions for probable litigation obligations were $55.1 million at December 31, 2020. The company settled litigation with Match Group in 2020 and reached settlements in class actions involving the “women message first” feature and subscription auto-renewal matters. A $9.3 million insurance reimbursement was recognized in 2020.
- A contingent earn-out payable to former Worldwide Vision shareholders had a December 31, 2020 fair value of $40.7 million and a maximum potential payment of $150 million.
- Blackstone and other principal stockholders held approximately 94.8% of combined voting power after the IPO-related transactions, creating significant voting concentration and related-party governance risks.
Most important facts for investors to verify
- Reconcile the Successor and Predecessor periods before assessing 2020 growth, profitability or margins against 2019.
- Review the reconciliation of Adjusted EBITDA and free cash flow to GAAP measures, including the treatment of acquisition costs, amortization, stock compensation, litigation, foreign exchange and earn-out remeasurement.
- Verify post-IPO debt repayment, remaining term-loan principal, interest rates, revolver availability and covenant compliance.
- Assess the cash-flow impact and timing of the tax receivable agreement, including potential acceleration upon a change of control or early termination.
- Monitor paying-user growth, ARPPU trends, retention and engagement separately for Bumble and Badoo.
- Evaluate exposure to Apple and Google app-store policies, privacy regulation, cybersecurity incidents and international data-transfer restrictions.
- Track remediation of the material weakness in information-technology controls and any subsequent restatements or control deficiencies.
- Review outstanding litigation, the $55.1 million litigation provision, the Match settlement and the contingent earn-out liability.