Bumble Inc. — Q1 2023 Form 10-Q
Reporting period: Three months ended March 31, 2023; comparisons are with the three months ended March 31, 2022 unless noted. Amounts are in U.S. dollars.
Business context
Bumble operates the Bumble, Badoo and Fruitz dating and social networking apps, monetizing primarily through subscriptions and in-app purchases. The company reports one operating segment. Fruitz revenue is included in Badoo App and Other revenue, but Fruitz users and revenue are excluded from the disclosed paying-user and ARPPU metrics.
Financial and operating performance
| Metric | Q1 2023 | Q1 2022 |
|---|---|---|
| Revenue | $242.9 million | $210.0 million |
| Operating earnings | $9.1 million | $19.0 million |
| Net earnings (loss) | $(2.3) million | $23.7 million |
| Net earnings (loss) attributable to Bumble Inc. shareholders | $(1.6) million | $16.2 million |
| Operating margin | 3.7% | 9.1% |
| Net margin | (1.0)% | 11.3% |
| Adjusted EBITDA and margin | $59.3 million; 24.4% | $49.8 million; 23.7% |
| Operating cash flow | $13.4 million | $19.4 million |
| Capital expenditures | $6.8 million | $5.0 million |
| Free cash flow | $6.6 million | $14.4 million |
Revenue grew 15.7%. Bumble App revenue rose to $194.3 million from $154.4 million; Badoo App and Other revenue fell to $48.7 million from $55.7 million. Bumble App paying users increased 30.6% to 2.32 million, while Bumble ARPPU declined 3.6% to $27.93. Badoo App and Other paying users declined 7.4% to 1.14 million and ARPPU fell 7.5% to $12.47. Total paying users rose to 3.46 million from 3.01 million, and total ARPPU edged up to $22.83 from $22.63.
At March 31, 2023, cash and cash equivalents were $389.0 million, down from $402.6 million at year-end. Total debt carrying value, including current maturities, was $624.0 million; principal outstanding was $631.4 million. Cash less debt carrying value was approximately $235.0 million. The company reported $521.0 million of current assets and $208.6 million of current liabilities. Management said it expects sufficient financial resources to fund operations and plans over the next 12 months.
Changes and drivers versus the prior-year quarter
- Revenue growth was driven mainly by Bumble App user growth and, to a lesser extent, higher total ARPPU, partially offset by foreign-exchange movements.
- Profitability weakened despite higher revenue: operating expenses rose 22.4% to $233.9 million. Cost of revenue increased to 29.1% of revenue from 26.5%, attributed to higher in-app purchase fees, content moderation and Google Play billing adoption.
- General and administrative expense more than doubled to $49.8 million, primarily reflecting a $20.1 million smaller gain from changes in contingent earn-out fair value and $7.7 million higher personnel costs. Stock-based compensation rose to $28.6 million from $17.6 million.
- Depreciation and amortization declined to $16.7 million from $26.9 million, primarily because the legacy Badoo user base was fully amortized in July 2022.
- Other income shifted to a net expense of $3.6 million from net income of $13.2 million, primarily due to less favorable interest-rate-swap fair-value changes and lower foreign-exchange gains. The 2022 comparison also included a substantial contingent earn-out fair-value gain.
- Operating cash flow declined to $13.4 million from $19.4 million, with timing of cash receipts and bonus payments among the factors cited. Accounts receivable increased by $26.0 million during the quarter. Q1 2022 investing cash use included $69.7 million for the Fruitz acquisition; Q1 2023 investing cash use was primarily capital expenditures.
Outlook, risks and unusual items
- Management expects macroeconomic conditions to continue adversely affecting Badoo App and Other paying users during the remaining quarters of 2023. It also noted that foreign-exchange volatility and a strong U.S. dollar may affect revenue and earnings.
- The company discontinued operations in Russia and removed its apps from the Apple App Store and Google Play Store in Russia and Belarus in March 2022. It classifies cash held in Russia as restricted cash.
- Term loans transitioned from LIBOR to Adjusted Term SOFR effective March 31, 2023. Interest rates at quarter-end were 7.38% on the Original Term Loan and 7.88% on the Incremental Term Loan. The company reported compliance with debt covenants. Interest-rate swaps cover $350 million of debt through June 2024; an April 2023 amendment transitioned the swaps to SOFR.
- A $150 million maximum earn-out tied to the former Worldwide Vision shareholders had a $51.7 million fair-value liability at quarter-end. The separate Fruitz earn-out liability was zero. The debt matures in 2027, with $609.8 million of principal scheduled for 2027 and thereafter.
- The tax receivable agreement requires payments to certain pre-IPO owners equal to 85% of specified realized or deemed tax benefits. The recorded liability was $425.7 million; the company estimates it could total $723.7 million if additional tax benefits are determined realizable. The liability increased $31.4 million in the quarter, principally due to the March secondary offering.
- The March 2023 secondary offering involved 13.75 million shares sold by Blackstone-affiliated stockholders and the Founder at $22.80 per share. Bumble did not sell shares or receive proceeds, but paid certain sale costs. The company’s board has authorized up to $150 million of share repurchases; the filing does not provide a specific repurchase timetable.
- A proposed $18 million settlement of the September 2021 offering securities class action received preliminary court approval; the company and insurers paid the amount into escrow. The company reported $20.5 million of litigation provisions. Four Illinois biometric privacy class actions remain in early stages, and the company said it cannot reasonably estimate potential liability. The company also disclosed related derivative litigation and an SEC inquiry concerning the offering disclosures.
- The company reported a 920.1% effective tax rate, driven in part by near break-even pretax income and other tax factors; the rate is not a normalized indicator of ongoing tax expense.
Investor verification points
- Assess whether Bumble App user growth can continue and whether declining ARPPU, Badoo trends and foreign-exchange effects will constrain revenue growth.
- Reconcile GAAP losses and lower free cash flow with higher Adjusted EBITDA; review the non-GAAP adjustments, including stock compensation and fair-value movements.
- Monitor floating-rate debt costs, the 2027 maturity concentration, covenant headroom and the effectiveness of the $350 million interest-rate hedge.
- Verify the eventual costs and status of the securities settlement, biometric privacy claims, derivative litigation and SEC inquiry.
- Track tax receivable agreement payments and assumptions supporting realization of tax benefits, along with potential dilution from equity awards and exchanges of Common Units.