Bumble Inc. — Q3 2023 Form 10-Q
Reporting period: Three and nine months ended September 30, 2023; year-over-year comparisons are to the corresponding 2022 periods. Unless noted, financial amounts below are in U.S. dollars and millions.
Business context
Bumble operates a single reportable segment providing dating and social-networking apps through subscriptions and in-app purchases. Its apps include Bumble, Bumble For Friends, Badoo, Fruitz and Official. Bumble For Friends launched in July 2023; Official was acquired in April 2023.
Financial performance and liquidity
| Metric | Q3 2023 | Q3 2022 | Nine months 2023 | Nine months 2022 |
|---|---|---|---|---|
| Revenue | $275.5 | $232.6 | $778.2 | $661.9 |
| Operating earnings | $30.0 | $28.3 | $60.2 | $44.6 |
| Net earnings | $23.1 | $26.4 | $30.1 | $45.1 |
| Net earnings attributable to Bumble Inc. shareholders | $16.7 | $18.1 | $21.8 | $30.8 |
| Diluted EPS | $0.12 | $0.14 | $0.16 | $0.23 |
| Adjusted EBITDA (non-GAAP) | $75.3 | $61.8 | $201.9 | $166.4 |
Q3 net earnings margin was 8.4% (11.4% in 2022); Adjusted EBITDA margin was 27.3% (26.6%). For the nine-month period, net earnings margin was 3.9% (6.8%) and Adjusted EBITDA margin was 25.9% (25.1%). Adjusted EBITDA is a non-GAAP measure; the company cautions it excludes recurring costs and is not a substitute for GAAP results or a measure of discretionary cash.
- Revenue mix: Q3 Bumble App revenue was $221.8, up from $180.6; Badoo App and Other revenue was $53.7, up from $52.0. Nine-month figures were $624.0 and $154.2, respectively, versus $503.5 and $158.4.
- Operating metrics: Q3 total paying users, excluding Fruitz and Official, were 3.82 million versus 3.29 million. Total ARPPU was $23.42 versus $22.96. Bumble App paying users rose 24.7% to 2.60 million, while Bumble App ARPPU declined 1.6% to $28.38.
- Cash flow: Nine-month operating cash flow was $118.7, compared with $81.8; capital expenditures were $12.8, compared with $11.3; and free cash flow (company-defined, non-GAAP) was $105.9, compared with $70.5.
- Cash and debt: Cash and cash equivalents were $439.2 at September 30, up from $402.6 at year-end 2022. Term-loan principal was $628.5; net carrying debt, including current maturities, was $621.9. No revolving-credit borrowings were outstanding. Term-loan rates were 8.17% and 8.67%; the loans mature January 2027. The company reported compliance with financial debt covenants.
- Balance sheet: Current assets were $584.1 and current liabilities $196.9. A $416.8 payable under the tax receivable agreement was recorded, in addition to other liabilities.
Material changes and management commentary
- Revenue increased 18.4% in Q3 and 17.6% for the nine months. Management attributed growth mainly to increased paying users; Q3 also benefited from higher total ARPPU and favorable foreign exchange. Nine-month growth was partly offset by unfavorable foreign exchange.
- Net earnings declined year over year in both periods despite higher revenue. Q3 general and administrative expense rose 78.2% to $48.6, including higher legal and professional fees and a smaller gain from revaluing contingent earn-out liabilities. Nine-month G&A rose 41.6% to $141.7, with similar drivers.
- Cost of revenue increased faster than revenue, reaching 29.1% of Q3 revenue and 29.2% for the nine months. Management cited increased content moderators and adoption of Google Play billing in many markets. Depreciation and amortization declined, primarily because the legacy Badoo user base was fully amortized in July 2022.
- Badoo App and Other revenue declined 2.7% for the nine months. Management cited lower ARPPU, the continuing effect of withdrawing apps from Russia and Belarus, and macroeconomic conditions. In contrast, Q3 Badoo App and Other revenue increased modestly.
- Cash from operations increased, but working-capital movements included a $32.8 increase in accounts receivable, attributed to timing of cash receipts. Investing cash outflow was $22.6, including $9.8 for the Official acquisition; financing cash outflow was $58.4, including share repurchases and $19.3 of distributions to noncontrolling interest holders.
Outlook, risks, contingencies and unusual items
- The filing provides no quantified revenue, earnings or margin guidance. Management said available financial resources are sufficient to fund activities and execute business plans over the next 12 months.
- Management warned that macroeconomic conditions, consumer pressure on discretionary spending, exchange-rate volatility and geopolitical conflicts may adversely affect demand and results. The company has material international exposure and does not historically hedge foreign-currency exposures. A hypothetical 10% move in the pound and euro would have changed nine-month 2023 revenue by $6.1.
- Floating-rate debt remains an exposure, partly mitigated by interest-rate swaps covering $350 of debt through June 2024. A hypothetical 1% rate increase would have increased nine-month interest expense by $2.1, considering the swaps.
- The company recorded approximately $14.0 of costs in Q3 and $19.5 for the nine months related to litigation matters, including mass-arbitration claims. Accrued legal liabilities were $22.0 at September 30. More than 15,000 individual California Unruh Act arbitration demands were received; mediation concluded and settlement offers were being made. A separate demand purported to represent over 5,000 claimants. The company could not estimate the number of claims that may proceed or the resulting liability.
- Four Illinois biometric-privacy class actions remain at an early stage; the company could not reasonably estimate potential liability. A separate shareholder securities class action relating to the 2021 secondary offering settled for $18.0; final court approval was granted in August 2023 and the amount was paid into escrow. Related shareholder derivative matters continue; a Delaware court denied a motion to dismiss one consolidated complaint in October 2023. The company also disclosed an SEC inquiry relating to offering disclosures.
- A contingent earn-out liability of $28.1 remained, against a potential Worldwide Vision earn-out of up to $150.0. The filing also describes up to $714.8 of estimated future tax receivable agreement payments if the company earns sufficient taxable income to realize the relevant benefits; actual amounts may differ materially.
- A minimum $12.0 cloud-services commitment extends over 18 months; $10.1 remained at September 30. In May, the board authorized up to $150.0 in repurchases; $20.9 had been spent during the nine months and $129.1 remained at quarter-end. On November 7, 2023, after the reporting date, the authorization was increased to $300.0.
- The company made an immaterial equity-statement classification correction for prior-period stock-based compensation; it said there was no impact on previously reported operations, comprehensive operations or cash flows. It also reclassified certain expenses between G&A and product development to align with functions.
Important facts for investors to verify
- Whether paying-user growth can continue and offset declining Bumble App ARPPU and pressure in Badoo markets.
- Whether legal and arbitration costs, including potential fees and damages, exceed recorded provisions or materially affect future results.
- The company’s ability to realize tax benefits underlying the tax receivable agreement and the timing and size of related payments.
- Debt service and refinancing exposure given floating rates, the 2027 term-loan maturity and the swaps’ June 2024 expiry.
- Cash-flow conversion and working-capital trends, particularly the rise in accounts receivable, alongside planned buybacks and other cash commitments.
- Potential dilution from equity awards and exchangeable Common Units; the filing notes approximately 188.2 million Class A shares would be outstanding if all outstanding Common Units were exchanged, before certain additional potential shares.