Hello, everyone, and welcome to the Raymond James TMT and Consumer Conference. So I'm Andrew Marok, and I cover digital media and advertising technology here at RJ. And we're thrilled to have Bumble joining us at this year's event, and with us from the company is CFO Anu Subramanian. Thanks for joining.
Thank you for having me.
Great. Before we dive in, let's get into the quick safe harbor statement. This presentation, including comments and answers to questions, may include forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect current expectations based on beliefs, assumptions, and information currently available to the company. Descriptions of these factors and other risks that could have caused actual results to differ materially from these forward-looking statements are discussed in more detail in Bumble's earnings press release, dated November 7, 2023, and Bumble's filings with the SEC, including its annual report on Form 10-K for the year ended December 31, 2022, and Bumble's subsequent periodic filings. So-
Well done.
Thank you. I used to work in IR. I have a little practice. So maybe why don't we kick off for, for those who maybe aren't as familiar with the company or the Bumble story, can you give us a quick overview of the company and how Bumble fits into the dating ecosystem?
Sure, happy to. We are Bumble Inc., and we have a portfolio of assets that include apps, both in the dating space as well as in the non-dating space. Within dating, we have three apps: Bumble, our flagship brand, Badoo, and Fruitz, which was a recent acquisition last year. And then in beyond dating, we have two assets, Bumble BFF, which is our friendship-focused app, and Official, which is a relationship, couples-based app that we acquired earlier this year. Bumble is the second-largest downloaded dating app in the world. It was founded by our CEO, Whitney, back in 2014 as an app focused on putting women at the center of the dating relationship.
And, you know, from the day we started the company, that has been a core ethos of how we operate, safety. And, you know, ultimately, our mission at the company level is to build healthy and equitable relationships for all through kind connections. And, you know, we make sure that every app that we have in the portfolio is always solving for that mission.
It seems a quite differentiated and, and durable brand message that, you know, Whitney was very instrumental in, in developing and, and driving forward. But we've heard recently that Whitney is announcing that she's moving on to her next challenge, while still sticking close to Bumble as the executive chair. So you have Lidiane Jones, formerly of Slack, coming in as CEO. So I guess, what were some of her strengths that made her a great fit for the job? And should we expect any changes to strategy or new emphasis areas during her term as CEO?
Sure. So for those that are unfamiliar, you know, we announced last month that Lidiane Jones will be joining us as the CEO in January 2024. And Whitney, who's our current CEO, will be stepping into a newly created exec chair role. You know, this was a very deliberate decision that was made by the board and with Whitney in terms of thinking about a succession plan for her. And we are all very excited for Lidiane to be joining in January. Lidiane has more than two decades of experience, having worked in product, engineering, and business across a variety of large companies, you know, Microsoft, Sonos, most recently Salesforce, and you know, as the CEO of Slack.
So she brings with her a very strong sensibility on, you know, how do you build for the consumer? And, you know, especially in this day and age, she also has a very strong background in AI, which is going to be very relevant for our sector and pretty much every tech company, you know, in the coming years. So, she's, you know, at Slack, done a lot of really exciting stuff around AI. And so we are very excited for her to bring her learnings and, you know, really for her to you know, hit the ground running when she starts in January. I think, ultimately, our strategic priorities are going to... You know, that we've sort of set out for ourselves, for the, the medium to long term, are largely going to be the same, right?
Mm-hmm.
I think we are excited for Lidiane to come in and provide her lens on, you know, how do we continue the pace of product innovation that's been really strong for us, but how do you make that even faster, right? What are the things we can do to hypercharge what we have on the roadmap? What can we do from an AI perspective to better serve our customers? So I think those are the things she'll be focused on. And, you know, Whitney is, you know, not going to be far away, right? Whitney is still... You know, it's Bumble.
If she were here, she will tell you Bumble is her first baby and will continue to be, and she is going to be very active, as an exec chair, focusing on the things that, you know, she really leveraged when she started the company, which is: how do you continue to build the brand? How do you continue to focus on big picture, social impact items? How does she continue to ensure that the mission that Bumble has of empowering women continues to be at the forefront of what we do? So I think the partnership that Whitney and Lidiane bring to the table-
Mm-hmm
... is going to be phenomenal, and I think it's a really exciting chapter for Bumble.
Yeah, it seems a very interesting crossroads for both the company and for Whitney.
Yeah.
So, can't wait to see what comes out of that. Kind of going back to that perception that the brand equity that you guys have built up in the dating ecosystem. Can you kinda give us an overview of how that brand message is resonating, continuing to resonate with Gen Z users? Kind of in the backdrop that maybe there are some mixed perceptions in the media about how Gen Z, in particular, is engaging with dating apps.
Sure. So I think, listen, it's important to take a step back and remember that for hundreds of years, people have always wanted to meet other people, find relationships, find partnerships, right? Inherently, human beings are social creatures, and that has not changed and will not change in the foreseeable future, right? So that's just one. Two, I think in the recent past, especially in the US, where I would say dating apps are more mainstream, but also in a lot of international markets where dating apps are becoming more mainstream, people recognize that dating apps provide the most efficient way to meet a lot of people at scale, right? So it doesn't matter how old you are, what generation you are, that fundamentally from a technological perspective, is true, right?
So I think, and Gen Z, even today, you know, in the current dating ecosystem, is a large part of the ecosystem, right? Both for us as well as overall among dating apps, and they are using dating apps at large scales. So I think what is important to remember is that, you know, an 18-year-old may have different ways of how they want to meet people, how they want to express themselves, and ultimately, what you know, how they come to the market from a dating perspective, but the need for them to date is not going away, right? So our job, and this is where we are heavily focused on as a company, is on ensuring that from a product and technological perspective, we continue to create products that resonate with them, right?
They care uniquely about things like self-expression, so we need to make sure that our products are catering to how they want to date. And that's what we are focused on as a company. And you'll see, as we talk more about our roadmap next year, that a lot of the things that we are focused on are going to be to help build that for Gen Z. Ultimately, I think the most important thing is, you know, Gen Z users care deeply about brands that stand for something, right? They, they, they want to be associated with companies that have a point of view, and that's where Bumble has, has really been successful, you know, between the work that we've done around, to our earlier point, around the women's empowerment, the work that we do around public policy, around social impact.
All of that resonates with Gen Z at a very deep level, and that's the reason why things like our College Ambassador Program, which effectively consists of college ambassadors in more than 600 college campuses, has been very powerful because we are able to show up in authentic ways that, you know, is not often the case for a lot of other brands. So I think, you know, we continue to be focused on this segment, and you know, I think it'll be an interesting next year.
Great. Kind of wanted to expand on one of the main points in that answer on product. So obviously, product being the lifeblood of the service within the online dating industry. Can you maybe highlight some of the significant advances in 2023? Maybe lay out the roadmap for 2024, and how you're feeling about execution to date and the capabilities of your product team.
Sure. So, you know, we look at product within several lenses. You know.
Mm-hmm.
At a high level, I will put them in a few buckets, right? The first one is continuing to build for our core audience, and to satisfy our core mission of putting women at the center of the experience. I think that is an always-on priority for us. It is not something that we just decide to do. It is at the core of how we think about product, and we fundamentally believe that creating experiences that are better for women automatically make the experience better for the entire ecosystem, both men and women. So I think anchoring on that is going to continue to be a core theme for us next year. And within that, you know, you have themes of making sure that we continue to be a safe and trusted product, right?
How do you think about customer service? All of those things are going to be key aspects of how we think about the product roadmap. Things that we've developed this year, things like Compliments, as an example, were really born out of: How do you solve a pain point that potentially men may have, but also make it easier for women, right?
Mm-hmm.
So you'll see us continue to build and innovate around these feature sets, you know, around women's experience. The second bucket that we've been focused on is from a monetization perspective. How do you create additional entry points for people to enter the paid experience? So we, as you know, we recently announced that we are expanding our subscription tiers from the two that we currently have, Bumble Boost-
Mm-hmm
... and Bumble Premium, into two more. One, on the higher end, above Bumble Premium, it's going to be called Premium Plus, and a lower tier, that will effectively form an entry point, especially catering towards the Gen Z audience that we just-
... talked about. So you know, creating more revenue architectures that cater to people across the spectrum is going to be, again, a huge core theme of our product roadmap next year. And then the third big focus is AI. Obviously, there's, you know, we talked about it briefly, but you know, AI today forms the underpinning of our relevancy algorithm. We have a lot of machine learning work that we do today already, which will continue to make sure that we provide the most relevant matches for our users. So I think continuing to enhance that is going to be a key pillar of focus for us.
Additionally now, with the technology that's available with Gen AI, leveraging that and using our core datasets to make it better for our users, I think is going to be a focus area for us next year. And if you think about the pain points that exist today in a user's journey, they often fall within, you know, sort of different aspects of their dating journey, right? So from the time someone downloads the app and they're trying to onboard, how do I pick the best picture? How do I pick, write my bio? All of those things we can simplify with the use of AI. Then, as they go through that, the next big pain point often ends up being: What do I say to someone, right? I don't know how to show up. I don't know what to message once I've matched with someone.
So again, using Gen AI to sort of create conversation starters, I think is going to be important. Interestingly, today we announced that on BFF, we've announced a new feature that is an AI-powered feature, which is effectively called Icebreakers, right? It's about once you've matched with someone, how does... AI effectively will give you a prompt to allow you to, you know, have as a conversation starter. And so we are testing that on BFF. It's now live. And, you know, the use cases of that on date are very interesting as well. So there's a lot that the company's doing around AI, which, will—we do believe be a pretty transformational aspect for the dating sector next year.
Great! We'll definitely be watching that space for sure. And then kind of again, on top of funnel, so international has been a key growth driver in a quite successful 2023 in terms of paying user ads. So I guess, what have some of the key learnings been from this year's international expansions, and what should investors keep an eye on in terms of the remaining opportunity?
You know, we said this at the time we went public, which is, you know, many, many international markets around the world still are in very early stages of where they are in adoption of dating apps, right? And three years since we've gone public, almost three years, you know, our thesis has definitely proven true, right? I think we have seen over the last few years that our app and our brand resonates in every new market that we've been to. And ultimately, people are looking to use an app that they consider to be a safe and trusted environment. So we've developed a very solid playbook on how we think about going to market, right?
And obviously, we have to keep into account cultural nuances of, you know, the geography that we enter, the adaptations that we have to do from a language perspective, product perspective, all of that. And, you know, we have a very sophisticated team that does that, both across product as well as, you know, things like localization. But ultimately, you know, the roadmap that we have, the playbook that we have to go international has largely stayed pretty consistent, right? We stay core to our roots. We find people at the local level. This is ultimately a... It, it's a localized marketplace business, right? So we have to make sure that we build the ecosystem from the ground up. So we take a city-by-city approach to how we launch internationally, and that'll continue largely next year.
A lot of the markets that we've entered recently, whether in Western Europe, whether it's in Asia, whether it's in Latin, are at a pretty sizable point, you know, as at a monthly active user base level, right? So we also are now focused on how do you convert a lot of them into paying users, because driving payer penetration is also going to be an important focus next year.
Sure. Kind of on the more general backdrop, I mean, I think, how would you characterize the current macro environment and sensitivity of your users to economic fluctuations now that it's been a few quarters where macro picture has been a bit unsettled?
Yeah. So, you know, historically, when we've looked at macro, for our sector, especially for Bumble app, our users have proven to be pretty resilient. So even from the time of COVID to last year in Europe, when we saw the Russia war, the Ukraine war, pressure on energy prices, we've seen that our user base continues to be pretty strong, and, you know, you're seeing that this year as well. Obviously, that's reflected in the performance of the business and how we've done. Most recently in our earnings, we had indicated that we are seeing a little bit of impact as it relates to our younger users. Again, a small portion of our younger users, especially as it relates to Bumble Boost. We've seen some impact. I think it's too early to say exactly what that is.
We think it is directly correlated to the student loan repayments.
Mm.
It seems to be a US issue, so it's definitely something we are keeping an eye on. Our adoption of our high, you know, the Bumble Premium tier, which makes up the majority of our revenue, has been pretty steady. So, you know, generally, we feel good about where we are. Again, you know, keeping a close eye on what happens in the economy. And then, on the other side, I would say Badoo, which was hit pretty hard from a macroeconomic perspective over the last, you know, three-four years, has started to see stabilization.
It is showing signs of growth again, and, you know, this is sort of really testament to the hard work that the teams have done to revamp the product, revamp the brand, such that even the Badoo core demographic, which is a little bit more economically challenged usually than the Bumble demographic, is also really resonating with the product. So, again, exciting signs for what this means for next year, and, you know, we'll be keeping a close eye on macro for sure.
Great. Yeah, and that did kind of tie into my next question about the commentary you gave on early thinking for 2024 revenue growth, at least in the low teens, kind of based on macro conditions as of the call last month.
Yeah.
I guess what are some of the biggest variables that could cause actual results to come in either ahead of or below those figures?
My favorite puts and takes questions. I mean, listen, I think we are, you know, still very much in the, the planning stages for 2024. The way we think about guidance usually is we obviously have a pretty good sense of where the current trajectory of the business is. So we've taken into account what we are seeing today from a macro perspective, and we've said, Okay, what does that look like for the next, you know, 12, 18 months? Then we layer on known product initiatives, things that we may have launched halfway through this year. We know how they perform, the annualization impact of that, so we feel pretty good about that. And then, you know, we add in our assumptions around what does international growth look like.
Again, you know, we've had a steady pace of international growth, so we have a pretty good sense of, you know, what does a Stage One market look like versus a Stage Two growth market look like? So we've made assumptions on that.
Sure.
And then the last thing, which is always the one that is the hardest to forecast, is the new product initiatives, right? And we, the way we think about guidance and forecasting when it comes to that piece is we make reasonable assumptions on all of these new products that we have. Some are already being tested, so we've seen testing data, so we are able to say, Okay, we think this is what this looks like. Some are new, and we haven't really seen, so we take a more conservative view. So where we end up next year is going to be a function of how all of these things perform. But, you know, as we, as we guided in, in during our earnings call last month, we've guided to at least low teens, and, you know, we feel good about where we are.
Our plan is to come back in February when we conclude the planning process, and once Lidiane has had a chance to also take a look at what the plans look like for 2024, to come in and sort of refine that and provide everyone more guidance and clarity.
Great. And then kind of continuing the financial outlook analysis here. On the margin front, you've seen a tick-up in EBITDA margins over the course of 2023 and are guiding to a further 50-100 basis points increase in 2024. So I guess, what are some of the key considerations in terms-
Mm-hmm
... of like balancing the growth opportunity, especially in product areas like AI-powered features, against margin expansion?
So we've been saying this now for a while. You know, we are very committed and focused on expanding margins. You've seen us do that over the course of the last few years, and you'll see us continue to do that. At the end of the day, we still believe there is a ton of room for revenue to continue growing, and we are a growth-oriented company, so we wanna make sure that we continue to invest in that, whether that's in international expansion, whether that's in new technology, to your point, making sure we have the best-in-class talent as it relates to product and AI and machine learning and data science. All of that is sort of factored into how we are thinking about next year.
And from a marketing perspective, right, continuing to invest in our brand, because our brand is our biggest moat, is also a huge pillar of how we think about investment for next year. So those are all the things that, you know, will be part of our investment thesis. At the same time, where we expect to find leverage is on marketing spend. You know, we've compared to 2022 versus 2023, you've seen us show leverage on that line item. Our goal would be to continue to do that. As any company should, especially in this environment, we are taking a look at every area of spend-
Mm-hmm
... making sure that, you know, we haven't extended ourselves too far in certain areas, asking ourselves if this is the right thing to be spending money on. So that is an ongoing process, and as we complete the planning process for next year, you know, taking a hard look at that, and some of it we drop to the bottom line, and some of it we use to fund the investment areas that we want to be investing in. So that's the general philosophy of how we are thinking about it, and that's what's guiding the 50-100 basis points of margin expansion that we've guided to.
Maybe a little bit related, but more on the capital allocation side of things. Bumble has historically kept a bit tighter of a brand portfolio, although starting to open up a little bit with the acquisitions of Fruitz and Official. I guess, how are you thinking about potential M&A for brand portfolio expansion, and what aspects are attractive in a potential acquisition opportunity?
Sure. So, I think when we've talked about capital allocation, we've talked about it in three big buckets of how we think about investing. The first one is investing in ourselves. We talked a lot about using our P&L to continue to grow revenue. The second bucket is M&A, and the third one is share buyback, which I'm sure we can talk about as well, just given the news this morning. But specifically on M&A, I think we've always said. So we've done two acquisitions since we've been public as a company. We bought Fruitz last year, and we bought Official this year. They both were, you know, smaller investments, one in the dating space and one in the non-dating space.
I think within dating, we've always said our goal is not to acquire another dating app for the sake of acquiring a dating app. We wanna make sure that we only look at assets to acquire that are, you know, either satisfying a core demographic or a geographical location that we don't believe we can get to organically. And, you know, we looked at many, many assets when we were looking to buy Fruitz, and Fruitz was the only one that we've seen such vital organic growth, and it caters to the very attractive Gen Z population. So that was the reason why we bought Fruitz. And, you know, Fruitz is a, is a, you know, top two asset, I think, right now in France, and continues to only get stronger. So, you know, that's how we think about dating.
Again, the bar for how we think about dating is very high. The last thing I will also add is across M&A, and this applies both to dating and non-dating. You know, we are very attracted to assets that continue to align closely with the broader mission that the company has of building kind and equitable and healthy relationships. So whether it's a technology acquisition, whether it's a brand acquisition, it's very important to us that the founders and the companies that we buy are closely aligned with that, because, you know, that is a core differentiator for us, and we wanna make sure we continue to do that.
Then lastly, I will say on the beyond dating side, you know, we saw Official as sort of the next frontier of where we think, you know, apps for people that are already in relationships look like. I think, you know, you increasingly hear people talk about investing in their relationships, right? You're not waiting for a relationship to go bad before you start paying attention to it, especially if you think about the younger users. They are constantly working on themselves and working on their relationships. And Official solves a very interesting use case there because it also allows us to extend the LTV for users that have met on Bumble, have met on Badoo, and potentially have met on any other dating app, and allow them to continue to work on that.
If the relationship doesn't work out, then we have the opportunity to sort of bring them back to the date ecosystem as well. We've been quite heavily focused on how do you build that loop of continuing to keep people in the ecosystem, which is where Official is interesting.
Yeah, that's a really interesting point on the relationship health conscious aspect-
Yeah.
broadening that LTV. Plenty of, plenty of discussion we could have there, but in the couple minutes we have remaining, I did wanna touch on that buyback announcement from this morning. Was there anything in particular that kind of catalyzed that? And I guess, how should we think about the trajectory of the Blackstone stake in the business?
Sure. So for those that, you know, haven't had a chance to see it yet, this morning we announced that Bumble agreed to buy $100 million worth of shares from Blackstone as part of our share repurchase program that we announced earlier this year. So in May, our board authorized a $150 million share buyback program, and in November, we increased that buyback authorization to $300 million. So the $100 million falls within that. And, you know, I think we've consistently said that we continue to believe that investing in ourselves, especially at, you know, current levels, is a very good use of our cash. And we are very committed to returning cash to our shareholders, within the framework of the capital allocation priorities that I mentioned.
Having the opportunity to buy directly from Blackstone allows us to do this in a very controlled manner and allows Blackstone to, you know, reduce their stake over time as well. So we thought, you know, this was a very helpful transaction from that perspective. And, you know, we've also been buying in the open market since November, and so we have $143 million left in the $300 million buyback program, which includes the amount that we bought in Q2, as well as what we bought this quarter. So, you know, we're excited about continuing to deploy our cash, which again, we have a healthy free cash flow generation, and, you know, continuing to invest in our business.
Great. Well, we're bumping up against time here, so I think we'll stop here. But Bumble CFO, Anu Subramanian, thank you for joining us.
Great. Thanks for having me.
Thanks, everyone.