Bumble Inc. 2022 Q3 Form 10-Q Summary
Reporting period: Quarter and nine months ended September 30, 2022. The unaudited filing was signed November 16, 2022. Bumble operates subscription and in-app-purchase dating platforms, including Bumble, Badoo and, following its January 2022 acquisition, Fruitz.
Financial and operating performance
| Metric | Q3 2022 | Q3 2021 | Year to date 2022 | Year to date 2021 |
|---|---|---|---|---|
| Revenue | $232.6m | $199.1m | $661.9m | $553.9m |
| Operating earnings (loss) | $28.3m | $(8.2)m | $44.6m | $(130.1)m |
| Net earnings (loss) | $26.4m | $(10.4)m | $45.1m | $295.7m |
| Net earnings (loss) margin | 11.4% | (5.2)% | 6.8% | 53.4% |
| Adjusted EBITDA and margin | $61.8m; 26.6% | $54.5m; 27.4% | $166.4m; 25.1% | $152.4m; 27.5% |
Q3 net earnings attributable to Bumble Inc. shareholders and Buzz Holdings owners were $18.1m, or $0.14 per share/unit diluted. Operating costs were $204.3m, 87.8% of revenue; operating margin was 12.2%. The filing presents Adjusted EBITDA as a non-GAAP measure.
- Revenue mix: Bumble App revenue was $180.6m, up 27.9%; Badoo App and Other revenue was $52.0m, down 10.2%. Q3 total revenue grew 16.8%. Fruitz revenue is included in Badoo App and Other revenue but excluded from the reported operating metrics.
- Paying users and average revenue: Q3 Bumble App paying users increased 36.2% to 2.09m; Badoo App and Other paying users declined 9.8% to 1.20m. Total paying users rose to 3.29m from 2.87m. Total average revenue per paying user was $22.96, compared with $22.81; Bumble and Badoo measures were $28.84 and $12.75, respectively.
- Cash flow: For the first nine months, operating cash flow was $81.8m versus $20.3m; capital expenditures were $11.3m and free cash flow was $70.5m versus $10.9m. Cash flow from operations and free cash flow are not provided for Q3 alone in the supplied filing text.
- Liquidity and debt: September 30 cash and cash equivalents were $365.1m, down from $369.2m at year-end; an additional $6.8m was classified as restricted cash held in Russia. Current assets were $452.0m and current liabilities $139.6m. Debt, including current maturities and net of issuance costs, was approximately $626.0m; principal outstanding was $634.3m. The term loans mature in 2027. The company reported compliance with debt covenants.
Material changes versus comparable periods
- Q3 revenue growth was led by Bumble App expansion and higher paying-user numbers; Badoo performance weakened amid the Russia and Belarus app removals, currency movements and continuing COVID-19 and macroeconomic pressures.
- Q3 operating earnings improved from a loss to $28.3m. General and administrative expense declined 34.8%, principally reflecting a $32.2m favorable change in contingent earn-out fair value, partly offset by higher stock-based compensation and other costs.
- Q3 Adjusted EBITDA increased 13.5%, while its margin declined 0.8 percentage points. Selling and marketing expense rose 16.7%, principally due to higher digital marketing and personnel costs.
- Year-to-date 2022 net earnings were substantially below 2021, when results included a $441.5m tax benefit from reversal of a deferred tax liability related to international restructuring. The 2021 comparison is therefore not a straightforward indicator of underlying operating change.
Outlook, risks, contingencies and unusual items
- Management said it expected COVID-19 and macroeconomic conditions to continue adversely affecting Badoo paying users in Q4 2022. It also expected additional Google Play billing fees to negatively affect cost of revenue by approximately 2% over the remainder of fiscal 2022. No broader numerical revenue or earnings guidance is provided in the filing text.
- The company said its available financial resources were sufficient to fund activities and business plans for the next twelve months. It cited consumer spending, foreign exchange, competition, user retention and conversion, app-store distribution fees, privacy and cybersecurity, regulation, and geopolitical conditions as risks. Management noted that a stronger U.S. dollar had affected and could continue to affect revenue and earnings.
- Bumble announced its exit from Russia and removal of its apps from Russia and Belarus app stores. About 120 employees were affected; the company expected total restructuring charges of $7m–$10m for 2022 and had recorded $7.8m for the first nine months, including a $4.4m Moscow office impairment. A Moscow lease termination agreed in October required an approximately $1.8m payment.
- Fruitz was acquired for approximately $75.4m, including contingent consideration; the acquisition added $41.5m of goodwill. A separate contingent earn-out liability, including the Worldwide Vision and Fruitz arrangements, was $53.0m at quarter-end, down from $96.6m at year-end. Fair-value changes affected reported earnings.
- Stock-based compensation was $37.2m in Q3, compared with $23.8m a year earlier. A July modification of certain performance-based awards added $35.8m of compensation cost expected to be recognized over three years.
- The company revised previously issued comparative financial information for errors involving debt issuance costs and third-party aggregator refunds, which it assessed as immaterial to prior periods. It reported that a material weakness in prior-period internal controls had been identified and remediated as of September 30, 2022; management considered disclosure controls effective at quarter-end.
- Pending matters include Illinois biometric-privacy class actions, a California privacy action, a securities class action relating to the September 2021 secondary offering, related shareholder derivative suits, and an SEC inquiry concerning disclosures at issue in the securities action. The company said it could not reasonably estimate potential liability for these matters. Recorded litigation provisions were $1.3m at September 30.
- The company’s tax receivable agreement requires payment to certain pre-IPO owners of 85% of realized or deemed tax benefits. The recorded liability was $389.0m; management estimated future payments related to the offering transactions could total $660.3m if sufficient taxable income allows realization, but actual payments could differ materially.
Important facts for investors to verify
- Whether Bumble App user growth and pricing can offset continued declines in Badoo paying users and average revenue per paying user, including foreign-exchange effects.
- How Q4 performance and app-store billing fees compare with management’s stated expectations, and whether Fruitz contributes to growth beyond the amounts included in reported revenue.
- The recurring cash burden of debt service, the tax receivable agreement and contingent earn-outs, alongside reported free cash flow.
- Progress and costs of the Russia exit, and developments or potential exposure in the securities, privacy and biometric litigation and SEC inquiry.
- Whether the revised comparative financial statements, remediation of the prior-period material weakness, and the significant noncash fair-value and stock-compensation items affect interpretation of reported earnings.