Bumble Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. Bumble operates subscription and in-app-purchase dating and social apps, including Bumble, Badoo, Fruitz and Official. Figures below are in U.S. dollars; financial statement amounts are in millions unless stated otherwise.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $259.7 | $219.2 | $502.7 | $429.2 |
| Operating earnings (loss) | $21.2 | $(2.8) | $30.2 | $16.3 |
| Net earnings (loss) | $9.3 | $(5.0) | $7.0 | $18.7 |
| Net earnings (loss) attributable to Bumble Inc. shareholders | $6.8 | $(3.4) | $5.1 | $12.8 |
| Adjusted EBITDA (non-GAAP) | $67.3 | $54.8 | $126.6 | $104.6 |
| Adjusted EBITDA margin (non-GAAP) | 25.9% | 25.0% | 25.2% | 24.4% |
Q2 revenue increased 18.5%; operating margin improved to 8.2% from (1.3)%, while net margin was 3.6% versus (2.3)%. For the first half, revenue rose 17.1%, but net earnings fell; net margin was 1.4% versus 4.4%. The filing attributes the earnings comparison in part to less favorable other income, including changes in swap fair values and foreign exchange.
- Revenue mix: Q2 Bumble App revenue was $208.0 million, up from $168.5 million; Badoo App and Other revenue was $51.8 million, up from $50.7 million. First-half revenue was $402.3 million for Bumble App and $100.4 million for Badoo App and Other, compared with $322.8 million and $106.4 million, respectively.
- Users and monetization: Q2 paying users were 2.46 million for Bumble and 1.18 million for Badoo and Other; total paying users rose to 3.63 million from 3.02 million. Bumble ARPPU fell to $28.21 from $29.18 and Badoo and Other ARPPU to $12.83 from $13.56. These operating metrics exclude Fruitz.
- Costs and margins: Q2 cost of revenue was 29.5% of revenue versus 28.1%, reflecting, among other things, more content moderators and Google Play billing in more markets. Product development expense rose to $36.2 million from $24.9 million. Depreciation and amortization fell to $17.0 million from $27.2 million, principally because the legacy Badoo user base was fully amortized in July 2022.
- Cash flow, first half: Operating cash flow was $56.1 million versus $44.8 million; capital expenditure was $9.2 million versus $8.0 million; free cash flow (non-GAAP) was $46.9 million versus $36.7 million. Cash and cash equivalents declined to $381.0 million at June 30 from $402.6 million at year-end.
- Liquidity and debt: Current assets were $526.9 million and current liabilities $186.5 million. Debt carrying value, including current maturities, was $622.9 million; approximate net debt using carrying-value debt less cash was $241.9 million. Term loans mature in January 2027 and bore rates of 8.00% and 8.50% at quarter-end. The company reported compliance with financial debt covenants.
Material changes and unusual items
- Revenue growth was driven mainly by increased paying users, particularly on Bumble, partly offset by lower ARPPU and foreign-exchange effects. First-half Badoo and Other revenue declined, which the company linked to lower ARPPU, the Russia and Belarus app-store exits, and macroeconomic conditions.
- First-half operating cash flow included a $31.0 million use of cash from accounts receivable, attributed to timing of receipts. Financing cash outflows included $20.9 million of share repurchases and $19.2 million of distributions to noncontrolling-interest holders.
- In May, the board authorized repurchases of up to $150 million. The company repurchased 1.32 million shares for $20.9 million during the first half; $129.1 million remained available at June 30.
- The company acquired Newel (the Official app) in April for approximately $10 million in cash. First-half investing cash outflow also included $9.9 million for the acquisition, net of cash acquired.
- Stock-based compensation expense was $33.5 million in Q2 and $62.1 million in the first half, versus $22.4 million and $40.0 million in the comparable periods. Adjusted EBITDA excludes stock-based compensation and other items; it is not a GAAP measure or a substitute for earnings or cash flow.
- The company corrected a $75.5 million classification of stock-based compensation between additional paid-in capital and noncontrolling interests in equity statements. Management deemed the prior presentation immaterial; it said the correction did not affect previously reported operations, comprehensive operations or cash flows.
Outlook, risks and contingencies
- No specific revenue, earnings or other financial guidance is provided in the supplied filing text. Management said it believes available resources are sufficient to fund activities and business plans for the next 12 months.
- Management cited consumer spending and macroeconomic uncertainty, currency volatility, competition, user retention and conversion to paying users, app-store distribution fees, privacy and cybersecurity, and international operations as risks. It also noted the continuing effects of its Russia operations exit.
- As of August 4, 2023, approximately 15,500 individual arbitration demands alleged violations of California’s Unruh Civil Rights Act related to Bumble’s “women message first” feature. The claims were stayed pending mediation; the company recorded approximately $5.5 million of related costs in Q2 and said potential liability could not be predicted.
- The company disclosed an SEC inquiry concerning disclosures at issue in a securities class action. An $18 million settlement of that action received final court approval in August 2023; the company and insurers had paid the amount into escrow. Related derivative litigation and a shareholder litigation demand remained disclosed; potential losses were not estimable.
- Litigation provisions were $7.8 million at June 30, down from $20.5 million at year-end. Separately, a tax receivable agreement liability was $416.8 million; the company estimated potential future payments could total $714.8 million if sufficient taxable income allows realization of the relevant benefits. A cloud-services contract carried a remaining minimum commitment of $11.5 million.
Important facts for investors to verify
- Whether paying-user growth can continue while ARPPU declines, and how the company’s growth differs between Bumble and Badoo.
- The quality and sustainability of reported cash generation, including working-capital movements and the impact of stock-based compensation and other non-GAAP adjustments.
- Interest-rate exposure, debt repayment capacity and the timing and amount of tax receivable agreement payments.
- Developments and potential costs in the California arbitration demands, SEC inquiry and related shareholder litigation.
- Whether repurchases, acquisition spending and distributions remain consistent with liquidity needs and debt obligations.