Bumble Inc. — Q3 2021 Form 10-Q
Reporting period: Quarter and nine months ended September 30, 2021. Figures are unaudited. Unless noted otherwise, amounts are in U.S. dollars. Bumble operates the Bumble and Badoo dating and social networking apps, primarily through subscriptions and in-app purchases.
Financial performance and liquidity
| Metric | Q3 2021 | Q3 2020 | Change |
|---|---|---|---|
| Revenue | $200.5 million | $162.3 million | +23.5% |
| Operating loss | $8.2 million | $5.2 million | Loss increased |
| Net loss | $10.7 million | $22.8 million | Loss narrowed |
| Net loss margin | (5.3)% | (14.1)% | Improved |
| Adjusted EBITDA | $54.5 million | $53.7 million | +1.5% |
| Adjusted EBITDA margin | 27.2% | 33.1% | Down 5.9 percentage points |
Revenue growth was led by Bumble App revenue, up 38.9% to $142.5 million; Badoo App and Other revenue decreased 2.9% to $58.0 million. Bumble paying users increased 19.5% to 1.53 million, while Badoo and Other paying users declined 8.5% to 1.33 million. Total paying users were 2.87 million. Total average revenue per paying user was $22.97, up from $19.38.
Q3 cost of revenue was 28.2% of revenue versus 26.8% a year earlier. Selling and marketing expense rose 46.0% to $55.1 million, and product development expense rose 88.4% to $24.2 million. General and administrative expense declined 4.7% to $45.7 million, partly because the contingent earn-out fair-value charge was lower than in Q3 2020. Depreciation and amortization was $27.0 million.
For the first nine months, revenue was $557.4 million and Adjusted EBITDA was $152.4 million, with a 27.3% margin. Net earnings of $301.6 million included a $435.8 million income-tax benefit; pretax loss was $134.2 million. The tax benefit primarily reflected a $441.5 million deferred-tax liability reversal from restructuring international operations, so reported nine-month profit is not a clear indicator of underlying operating profitability.
Nine-month operating cash flow was $13.5 million; capital expenditures were $9.4 million and free cash flow was $4.1 million. At September 30, cash and cash equivalents were $291.6 million. Debt principal was $640.0 million, with carrying value, net of issuance costs, of $623.6 million; the term loan matures in 2027. The company reported compliance with debt covenants. Its $50 million revolving facility was available under the credit agreement, but the filing does not state a drawn balance.
Material changes and notable transactions
- Q3 revenue growth substantially outpaced Adjusted EBITDA growth, and Adjusted EBITDA margin declined as marketing, product development and cost-of-revenue spending rose.
- The February 2021 IPO generated approximately $2.36 billion in net proceeds, much of which funded purchases or redemptions from pre-IPO owners and repayment of $200 million of term debt. In September, Blackstone-affiliated holders sold 20.7 million shares in a secondary offering; Bumble received no sale proceeds and paid certain offering costs.
- The company repaid $200 million of incremental term debt in March. Debt principal declined to $640 million from $845 million at year-end 2020.
- Stock-based compensation was $23.8 million in Q3 and $99.5 million for the nine months. The IPO also made certain exit-vesting awards probable, accelerating recognition of related compensation expense.
- A contingent earn-out liability, measured using significant unobservable inputs, increased to $118.4 million from $40.7 million at year-end 2020; the nine-month fair-value charge was $77.7 million.
Outlook, risks and contingencies
- The filing provides no specific numerical revenue, earnings or margin guidance. Management said available financial resources were sufficient to fund activities and business plans for the next 12 months.
- Management highlighted uncertainty from COVID-19, including possible effects on demand, users’ ability to pay, consumer confidence and employee productivity. The future impact could not be reasonably estimated.
- Other stated risks include user retention and conversion to paying users, competition, app-store distribution fees, cybersecurity, privacy and regulatory compliance, international expansion, foreign-exchange movements, and variable-rate debt and LIBOR transition exposure. A 1% rate increase was estimated to raise interest expense by $0.7 million for Q3 and $2.3 million for the nine months, after considering swaps.
- A material weakness in information-technology controls meant disclosure controls were not effective as of September 30, 2021. Management said additional close procedures supported the fairness of the reported financial statements; remediation was ongoing and not yet validated over a sustained period.
- The tax receivable agreement entitles certain pre-IPO owners to 85% of specified realized or deemed tax benefits. The recorded liability was $381.2 million; estimated potential payments related to the offering transactions were approximately $647.7 million if sufficient taxable income allows realization. Payments are not included in the contractual-obligations table.
- Three non-practicing-entity patent matters were ongoing. Estimated possible losses for two were $1 million to $4 million; the range for the third could not be estimated. Legal provisions were $9.0 million at quarter-end. The filing says other legal matters were not expected by management to have a material adverse effect.
Comparability: The nine-month 2020 figures span predecessor and successor periods following the January 2020 Sponsor Acquisition, and the filing cautions that the accounting bases are not necessarily comparable. The 2021 nine-month net result is also distorted by the discrete tax benefit.
Important facts for investors to verify
- Whether Bumble’s paying-user growth, particularly in the Bumble App, continues and whether Badoo’s user decline persists.
- Whether revenue growth can translate into improved operating profitability and margins as marketing, development and stock-based compensation costs evolve.
- The sustainability of cash generation, debt reduction and liquidity after operating needs, capital expenditures, interest and tax-related payments.
- Actual tax benefits and payments under the tax receivable agreement, including changes in assumptions about taxable income and deferred-tax-asset realization.
- Progress in remediating the material weakness, and developments in the contingent earn-out valuation and unresolved patent litigation.