Bumble Inc. — Q1 2021 Form 10-Q
Business context and reporting period
Quarter ended March 31, 2021. Bumble operates the Bumble and Badoo dating and social networking apps, primarily monetized through subscriptions and in-app purchases. The company completed its IPO in February 2021. Because of the 2020 Sponsor Acquisition and subsequent reorganization, the filing presents 2020 results as separate predecessor and successor periods; those accounting bases are not necessarily comparable.
Financial and operating metrics
| Metric | Q1 2021 | Comparison / context |
|---|---|---|
| Revenue | $170.7 million | Bumble App $112.6 million; Badoo App and Other $58.1 million. The two reported 2020 periods total $119.1 million arithmetically, but are not directly comparable because of the accounting-basis change. |
| Paying users | 2.803 million total | 2.157 million in Q1 2020. Bumble App: 1.353 million, up 44.2%; Badoo and Other: 1.451 million, up 19.1%. |
| Average revenue per paying user | Bumble $27.75; Badoo and Other $12.76; total $19.99 | Q1 2020: $24.84, $12.26 and $17.73, respectively. |
| Operating result | Operating loss of $112.4 million | Operating expenses were $283.1 million, including $126.5 million general and administrative expense. |
| Net result | Net earnings of $323.4 million; diluted EPS $1.69 | Includes a $436.6 million income tax benefit, primarily from a restructuring-related deferred tax benefit; it does not indicate equivalent operating profitability. |
| Adjusted EBITDA | $46.1 million; 27.0% margin | Non-GAAP measure; excludes, among other items, stock compensation, taxes, interest and certain transaction and fair-value expenses. |
| Cash flow | Operating cash use $45.6 million; free cash flow use $48.3 million | Capital expenditures were $2.7 million. |
| Cash and liquidity | Cash and equivalents $246.0 million; current assets $394.5 million; current liabilities $201.1 million | Cash and equivalents were $128.0 million at December 31, 2020. |
| Debt | Debt carrying amount, including current maturities, $629.5 million | $826.2 million at year-end 2020; the company repaid $200 million of principal with IPO proceeds. Term loans mature in 2027; the company reported covenant compliance. |
Material changes and unusual items
- Revenue and paying-user metrics increased versus the disclosed Q1 2020 operating metrics. The Bumble app was the larger revenue contributor; the filing attributes its revenue change primarily to user growth.
- General and administrative expense included a $72.0 million increase in the fair value of the contingent earn-out liability, $13.5 million of transaction costs and $19.9 million of stock-based compensation. Product development expense also included $19.2 million of stock-based compensation. Total stock-based compensation was $45.8 million.
- The IPO generated approximately $2.361 billion in net proceeds. Proceeds were used for pre-IPO owner share and unit purchases/redemptions, a $200 million debt repayment, IPO expenses and general corporate purposes.
- The company recorded a $356.8 million tax receivable agreement liability. Payments to certain pre-IPO owners equal 85% of specified realized or deemed tax benefits; estimated total payments could reach $527.8 million if the relevant benefits are realized.
- Litigation provisions were $24.1 million at quarter-end, down from $55.1 million at December 31, 2020. The company paid $30.2 million to settle litigation during the quarter; estimated possible losses on two early-stage patent matters were $1 million to $4 million.
Outlook, risks and controls
- Management said available financial resources should be sufficient to fund activities and business plans for the next 12 months; no specific revenue or earnings guidance was provided.
- Management could not reasonably estimate the future effects of COVID-19, including potential impacts on demand, users’ ability to pay and operating conditions.
- Key disclosed risks include user retention and conversion, competition, reliance on Apple and Google distribution and fees, cybersecurity and privacy regulation, international expansion and foreign-exchange exposure. The company had not historically hedged foreign currency exposure. Its floating-rate debt also creates interest-rate and LIBOR-transition risk, partly mitigated by swaps covering $350 million of debt through June 2024.
- Disclosure controls were deemed ineffective at March 31, 2021 because of a previously reported material weakness in IT-related internal controls. Remediation was ongoing; management reported additional review procedures for the quarter’s financial statements.
- Governance includes enhanced voting rights for the Founder and Blackstone affiliates. COVID-19 uncertainty, contingent earn-out valuation and tax receivable agreement estimates are additional items to monitor.
Investor verification points
- Separate recurring operating performance from the one-time $436.6 million tax benefit; assess operating loss, cash use and adjusted EBITDA reconciliations.
- Review the reported 2020 comparison carefully because the predecessor/successor periods and acquisition accounting limit comparability.
- Track paying-user growth and revenue per paying user by app, along with marketing, product-development and stock-compensation costs.
- Validate debt repayment, remaining floating-rate exposure, liquidity needs and potential tax receivable agreement payments.
- Monitor remediation and testing of the material weakness, as well as litigation settlements and the contingent earn-out liability.