2023-05-19 04:16:35 ET
Summary
- Bumble's revenues came in at the high end of estimates.
- It maintained its revenue guidance of 16 to 19% for 2023.
- The revenue guidance of 16-19% is very impressive for a tough year and one of the highest in the industry.
- The stock isn't getting any love with a consistent short interest of 7%.
- I believe patient investors will be rewarded well; this is a good long-term investment.
Bumble's First Quarter grows 16% YoY
Bumble ( BMBL ) delivered on the top line, executing well to a 16% YoY revenue increase for Q1-2023. It also maintained its guidance for Q2-2023, expecting revenues of $254Mn to $258Mn or 17% over last year.
It improved non-GAAP margins, keeping sales and marketing expenses and headcount under control. Adjusted EBITDA of $59Mn crept up marginally to 24.4%.
For Q2, they're guiding to $62-$64Mn in adjusted EBITDA.
Bumble also reiterated its 16-19% revenue growth target for full year 2023 and an improvement of 100 Basis points in adjusted EBIDTA margin.
Closest competitor Match's ( MTCH ) revenues declined 1% in Q1-2023 to $787Mn, with its largest platform Tinder's revenue staying flat. Hinge, like Bumble is a focused platform on serious relationships or commitments, had an outstanding quarter growing revenues by 27% to $83Mn with an ARPPU close to $25.
Bumble Q1-2023 Revenue and Earnings (Bumble, Seeking Alpha, Fountainhead)
In Q1, Bumble App revenues grew 26% YoY, with the help of 98K net additional paying subscribers. Bumble App now has 2.3M paying users and management maintained its guidance of adding a net total of 500,000 subscribers in 2023. For Q2 it expects to grow Bumble App revenues by 22% to 25%.
ARPPU's (Average Revenue Per Paying User) is a little more difficult to grow, "Build it and they will come" , yes, but they won't pay more, at least not this year. ARPPU fell from $28.99 to $27.93 Some of the small downtick in ARPPU was also currency headwinds, but that's no excuse and Bumble has more work to do in getting more out of its payers.
Badoo lost 13% YoY but given Bumble's exit from Russia this is likely to be the last of the declines as next year will be a much easier compare. Excluding the impact of the Russian and Belarus exits Badoo paying users would have grown by 2%.
Key takeaways from the earnings call
International expansion is going well.
- Bumble was the most downloaded dating app in UK and Canada.
- It was in a virtual tie in Germany and second place in France and Benelux.
According to Bumble's C.EO. Whitney Herd, Bumble's net brand favorability with women in the US, UK, and France, especially for the Critical Gen Z segment was the highest of all major dating apps tracked by Morning Consult, the independent brand research group.
Bumble grew engagement and added users without overspending.
- Sales and Marketing expenses grew only 3% compared to the 16% revenue increase and were only 25% of revenues as compared to 28% last year.
- Management stressed on this a few times during the call - that a higher quality user experience was more important than pure marketing spend to increase the number of users. Their focus has always been to curate products better to improve chances of users getting hitched. Most of the expansion in Western Europe and India has been built on word-of-mouth engagement.
Complements, which is "Message before Matching", was rolled out in all markets and has been received well and should increase user engagement and fees.
Gen Z users are going to get a cheaper level service below Bumble Boost. Gen Z, born between 1997-2012 and 68 Mn strong, not surprisingly, saddled with college loans has faced bigger financial headwinds than earlier generations and creating an additional tier for a very crucial user segment is a smart move.
Bumble was very confident about customer demand in Q1 and President, Tariq Shaukat remained confident of continuing demand as well. Answering an Evercore analyst who asked about a competitor of theirs mentioning macro headwinds, he had this to say.
So, we are really seeing quite nice top of funnel demand in general, I think, across Bumble and Badoo, towards the end of the quarter again, Badoo was seeing a very nice level of registrations, and that continued into April, and Bumble has been quite strong from a registration standpoint. As I just mentioned, as you look at paying trends, what we basically see is that new subscriptions are continuing to be strong -- payer penetration continues to be strong. I'll speak about Bumble App here for a second and it modestly improved throughout Q1. So, I think that is a is a good sign. So, generally speaking, seeing pretty healthy demand trends. But, again, overall, we're seeing quite a nice demand picture. So, I think we're seeing quite a different trend there than what others may be seeing.
Challenges
Bumble checks many boxes with stellar sales growth, strong brand recognition and favorability, sticky network effects and pricing power, but several challenges remain.
Bumble talks about their superior curation, better product offerings such as Complements and Virtual Gifts and unique features such as Queen Bee and Honey Ambassadors. However, product enhancements, superior curation and power dating are not exclusive to Bumble. Expensive tiers for serious or power dating is also being offered by Hinge for $50 per month and Tinder is testing a $500 a month offering.
According to this Business Insider article, 43% of people between the ages of 18 and 29 are increasingly finding romance in their friend groups, including 50% of women in that cohort. Dating friends is becoming a trend, as more singles look for accountability and common interests from people they know are or are known to their friends. Many complained that dating apps were too transactional - corroborating that Bumble is on the right track by focusing on increasing and improving the user experience, but this will take some time and doing.
Stock Based Compensation of $29Mn in Q1-2023, at 12% of revenues has come down from 14% or $124Mn in 2021 and 14% or $111Mn in 2022.
In Q1-2023, SBC of $28.6Mn resulted in an additional 573,000 shares, diluting shareholders less than 0.5%, which is good. In their quest to improve non-GAAP margins, I certainly hope that Bumble doesn't exceed SBC beyond these levels.
According to their March 10-Q , Bumble had a basic share count base of 137.5Mn shares at the end of March 2023; however, on a diluted basis the total share count is about 189Mn shares, because this includes common units that are exchangeable for class A common shares. Keeping that share count in mind, I do want to point out that getting a halfway decent GAAP or Fully Diluted EPS on 189Mn shares is going to be a challenge and investors should be aware of it. For the next few years, this is clearly a high revenue growth and non-GAAP earnings story.
Also, while Bumble guided to improving Adjusted EBITDA margins by a 100 basis points in 2023, this improves it to about 25.4%, still lower than Adjusted EBITDA of 27.2% in 2021 and just above 25.1% in 2022.
Bumble remains a buy
Bumble jumped 10% after hours, post earnings on the revenue beat and consistent guidance of 16-19% of revenue growth for 2023. But the spark was short lived as the rally fizzled out and the stock barely made it past its previous day's close. Many Wall Street analysts did re-iterate their buy ratings, which now has an average price target of $24.54, implying an almost 50% upside. However, given the short interest of 7% in the stock, investors should be prepared for the long haul.
The network build and expansion that Bumble started in college capturing Gen Z, which is now about 68Mn strong, is a huge and sustainable competitive advantage.
As Founder and CEO, Whitney Herd put it on the earnings call.
I just want to take a second and double click on our unique understanding of the college audience and how this is not new. This is something we have been so focused on since I started the company in 2014.
So, we have this scaled program with what we call Honey Ambassadors and because we have consistently and constantly evolved that and stayed current with that, where we don't age with them necessarily. We're always bringing in the freshmen and the sophomores and the juniors and the seniors along with us.
So, we have this unique hook in with the influential college students. This is something, competitors can't go and just acquire this is something we've built over the years -- it's a deep ingrained network effect and so that is really paying off for us, because of those roots that we've planted over the years.
Badoo should stop bleeding in 2024, besides it has an easier 2023 to beat.
As I had pointed out in my earlier article on Bumble, international growth is key and Bumble got only 41% of its revenue from North America in Q1-2023 and it still has a long runway of growth.
In online dating, creating new product categories such as Bumble - Women First, or Hinge - Relationships, is key and gives each platform a moat. Hinge was the star performer for Match, with 27% revenue growth in Q1-2023. At $25 of ARPPU, Hinge also substantiates my thesis that focused, and niche segments will continue to do well and providing better curation and user experiences will lead to more revenue per user.
The duopoly of the dating app industry between Bumble and Match is another big plus for remaining invested in the stock.
For further details see:
Bumble's Impressive Quarter And Guidance: Reiterating Buy