Bumble Inc. 10-Q Summary — Quarter Ended June 30, 2021
All dollar amounts are in millions unless otherwise stated. Bumble operates the Bumble and Badoo dating and social networking apps, primarily through subscriptions and in-app purchases. The company completed its IPO in February 2021. Comparisons with 2020 require care: acquisition accounting created predecessor and successor reporting periods that are not fully comparable.
Financial and operating performance
| Metric | Q2 2021 | Q2 2020 |
|---|---|---|
| Revenue | $186.2 | $135.1 |
| Operating income (loss) | $(9.5) | $4.5 |
| Net income (loss) | $(11.1) | $(5.5) |
| Adjusted EBITDA and margin | $51.9; 27.9% | $32.5; 24.1% |
| Net loss margin | (6.0)% | (4.0)% |
- Revenue rose 37.8%. Bumble App revenue increased 54.8% to $127.3 million; Badoo App and Other revenue rose 11.3% to $58.9 million.
- Average paying users increased to 2.93 million from 2.43 million. Bumble App paying users were 1.47 million; Badoo and Other paying users were 1.45 million. Total average revenue per paying user was $20.88, up from $18.12.
- Cost of revenue was 27.3% of revenue in both quarters, implying a 72.7% gross margin. Operating expenses exceeded revenue in Q2 2021; operating margin was (5.1)%, versus 3.3% a year earlier.
- Q2 general and administrative expense rose 115.5% to $43.4 million, driven in part by higher stock compensation, headcount and public-company costs. Product development expense rose to $24.9 million from $10.1 million.
- For the first six months, revenue was $356.9 million and Adjusted EBITDA was $98.0 million (27.4% margin). Reported net income of $312.3 million included a $441.5 million tax benefit from restructuring international operations; pretax loss was $123.8 million.
Cash flow, debt and liquidity
- Cash and cash equivalents were $252.0 million at June 30, up from $128.0 million at year-end. Current assets were $404.0 million and current liabilities $170.7 million.
- Six-month operating cash flow was negative $31.4 million; capital expenditures were $5.6 million and free cash flow was negative $37.0 million.
- Debt, including current maturities and net of issuance costs, was $624.2 million, compared with $826.2 million at year-end. The company repaid $200 million of term debt using IPO proceeds. The term loan matures in 2027; the company reported compliance with debt covenants.
- Debt is principally floating-rate. A 1 percentage-point rate change would affect estimated interest expense by $6.3 million for the quarter or $12.6 million for the six-month period, based on the debt balance and rate at quarter-end. Swaps fix the variable rate on $350 million of debt at 0.4008% through June 2024.
Material changes, outlook and risks
- Growth was driven by increased paying users and higher Bumble App revenue. Management said it had sufficient resources to fund operations and business plans for the next 12 months. The filing provides no specific revenue or earnings guidance.
- The IPO and reorganization changed the company’s capital structure and tax status. Pre-IPO owners are entitled under a tax receivable agreement to 85% of certain realized or deemed tax benefits. The company recorded a $356.8 million liability and estimated potential total payments of $527.8 million if relevant tax benefits are realized; actual payments depend on future taxable income.
- A contingent earn-out liability was $113.1 million at quarter-end, up from $40.7 million at year-end; the maximum payment is $150 million. Its fair-value increase contributed $72.4 million of six-month expense.
- Legal provisions were $17.0 million at quarter-end. The filing describes settled or preliminarily approved litigation and three early-stage patent matters; estimated possible losses for two matters were $1 million to $4 million, while a range could not be estimated for the third.
- Disclosure controls were deemed ineffective because of a previously reported material weakness in IT-related internal controls. Remediation was underway and had not yet been validated as effective; management performed additional procedures and stated the financial statements fairly present the results.
- Key stated risks include user retention and conversion to paying users, competition, app-store distribution fees, cybersecurity and privacy regulation, international and foreign-exchange exposure, COVID-19 uncertainty, variable interest rates and LIBOR transition, and concentrated voting control by the founder and sponsor.
Important facts for investors to verify
- How much of revenue growth reflects durable user and paying-user gains, versus pricing, currency or other factors.
- Underlying profitability and cash generation excluding the one-time tax benefit, stock-based compensation, earn-out remeasurement and other adjustments; assess the limitations of Adjusted EBITDA.
- Future tax receivable agreement payments, the realizability of tax benefits, and the assumptions behind the recorded liability.
- Progress and testing of the internal-control remediation plan, and whether the material weakness is resolved.
- Potential cash requirements from litigation, the contingent earn-out and floating-rate debt.