Bumble Q2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
August 7, 2024

There are 12 speakers on the call.

Operator

Hello, and welcome to the Bumble Second Quarter 20 24 Financial Results Conference Call. My name is Elliot, and I'll be coordinating your call today. I would now like to hand over to Cheryl Palenzuela, Vice President of Investor Relations. Please go ahead.

Speaker 1

Thank you for joining us to discuss Bumble's Q2 2024 Financial Results. With me today are Bumble's CEO, Lidiani Jones and CFO, Anush Subramaniam. Before we begin, I'd like to remind everyone that certain statements made on this call today are forward looking statements. These forward looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statement to reflect changes that occur after this call.

Speaker 1

Descriptions of factors and risks that could cause actual results to differ materially from these forward looking statements are discussed in more detail in our earnings press release and filings with the SEC, including our annual report on Form 10 ks for the year ended December 31, 2023 and our subsequent periodic filings. During the call, we also refer to certain non GAAP financial measures. These non GAAP measures should be considered in addition to, and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. And with that, I'll turn it over to Lidiani.

Speaker 2

Thank you, Cheryl, and good afternoon, everyone. When I joined Bumble 7 months ago, we embarked on a plan to strengthen our foundation to deliver long term growth and profitability. We added outstanding talent to our team, reset our cost structure, reinforced a culture of excellence and began to reimagine Bumble App's product to ensure we're delivering the best and most relevant customer experience to women today. As the first dating app built with women at the center, we continue to believe that when dating is better for women, it is better for everyone. That is scorched Bumble's mission and will remain our priority.

Speaker 2

In April, we launched the 1st chapter of Bumble App's evolution, including a refreshed looking feel, improved onboarding and profile creation of loans as well as launched opening moves, which gives women more choice in how conversations get started. This launch was just the first step and was successful in achieving 2 important objectives: delivering a better experience for women and improving engagement. We have seen increases in users with high quality profiles, more matches for women, and people voting us across genders. These early wins poised to the type of customer value that drives long term sustainable growth. This category is vibrant and we see tremendous opportunities ahead, but it's evident to reignite the user growth engine for our company in the long term, we need to take a firm stance towards delivering customer value that goes beyond this launch.

Speaker 2

We're making the difficult but important decision to reset our strategy to deliver durable customer value by addressing 2 fundamental interconnected challenges. First, we need to ensure we're capturing the right balance and mix of people in our customer ecosystem. This entails correcting demographic imbalances and improving retention by providing our customers with more innovative and compelling dating experiences. And second, we need to monetize more effectively while ensuring a great experience for both number one choice for people to find love, of making Bumble the number one choice for people to find love, friendship and community around the world. Our plan is focused on 3 important areas: ecosystem, the customer experience and our revenue strategy.

Speaker 2

Let me detail each one of them. Our first area of focus is fostering a vibrant customer ecosystem. Our customers come to our app to meet people, so getting the right balance, mix and intent of people in Bumble is fundamental to our success. Strengthening our ecosystem will result in better engagement, improved retention and ultimately deliver more successful outcomes to our customers. Our product choices going forward will increasingly favor ecosystem health and engagement on Bumble app.

Speaker 2

One example is prioritizing more robust profiles for all of our users. We know that creating detailed profiles and adding photos takes time and often causes friction, particularly during onboarding. However, we also know that quality profiles facilitate better engagement and greater customer success, particularly for women, which in turn also makes men's experience better. This April launch gave us some evidence of that. By raising the bar on minimum requirements for new user profiles and photos, we drove immediate improvements to engagement metrics, caused by a better experience and more engaged users in our ecosystem.

Speaker 2

While our efforts may turn away some lower engagement users in the near term, we believe this will ultimately result in a more authentic and better experience for our users over time. Achieving customer balance also involves updating our marketing playbook so that we can acquire the right users in each market. In mature markets where our brand recognition is strong, our focus will be on experiential and reengagement marketing strategies. While in Tier 2 and Tier 3 cities, we will expand our brand and digital marketing campaigns. To better execute on these goals, we're investing on marketing technology and data, including better analytics capabilities to effectively personalize how we reach our customers and optimize the ROI of our spend off different markets.

Speaker 2

Our second area of focus is customer experience, which begins with continuous product innovation, an area that I'm personally energized by and will be more directly engaged with our product and engineering teams. We are working on the next chapters of the Bumble apps evolution. And through the fall and early winter, we'll be launching several new features, including more options for making opening moves, new interest filters, improvements to our core matching algorithm, as well as customization to our chat timer. We will also introduce new AI driven features, including an AI assisted photo picker to ease the profile creation process and conversation support that will help our customers gain confidence to be their best selves. We have an ambitious view of how AI will enhance the value we deliver to our customers in each step of the dating journey profile creation, discovery, engagement and the core of our matching models.

Speaker 2

Another essential part of customer experience is safety and support. Bumble has a strong foundation for safety and we're doubling down on safety innovation by expanding our efforts to crack down on bad actors, remove duplicate accounts and add government ID verification on Bumble app, actions that may have a short term impact on MAU but will result in better and safer user experiences. We're also optimizing our operation to speed up support and safety resolution, while improving our accuracy and quality of service. These initiatives are designed to ensure customers know that they are part of an ecosystem committed to safety and healthy connection. Our third area of focus is evolving our revenue strategy.

Speaker 2

We are reevaluating how we deliver value at every step of our customers' journey from the top of the funnel to peer conversion, while optimizing for LTV. Over time, we'll rebalance Bumble's subscription tiers and merchandising in favor of mechanisms that reward positive payer behaviors and support better ecosystem health. As part of this process, we'll slow down certain monetization initiatives in the near term, including the expansion of Premium Plus. Being more deliberate about how we monetize in the near term does not mean that we see less growth opportunity. It means we're trading unsustainable short term growth in favor of better connecting customer experiences with long term growth potential.

Speaker 2

We will also lean on areas of strength and where we see growth opportunities, including Badu, international expansion and adjacent opportunities like advertising. While the initiatives I've outlined have been primarily about enhancing Vodou App, In reality, they extend across our entire portfolio with the goal of building out our offerings to expand our TAM. Baidu has provided us with great proof points of how we're orienting towards customer value is to better outcomes for them. In Q3, we're planning to roll out brand updates and the rearchitecture of the revenue strategy for Badu with new subscription tiers that are designed to be more affordable and encourage higher engagement. And as I shared last quarter, Bumble is a connections company and we remain excited by the potential to expand into apps for non romantic relationships.

Speaker 2

In July, we closed the acquisition of Geneva, a group and community app for people to connect based on shared interest. Geneva will meaningfully accelerate our opportunity and friendships and community space, and we're working towards launching it more broadly later this fall. We have more to share in the coming quarters. In closing, our renewed and relentless focus on customers is essential to unlocking further untapped growth in this category. I want to be clear that I do not take lightly the impact creation.

Speaker 2

I came to Bumble to innovate for our customers and help them find successful connections and relationships to our experiences. While we have a lot of work in front of us, I'm energized and confident in our path forward and will keep you informed on our progress along the way. I want to thank the Bumble team for their incredible hard work and dedication. And I want to thank our customers for their trust in us, as well as our partners and investors for their continued support. And with that, let me turn it to Anu.

Speaker 2

Thank you, Lidhiani, and good afternoon, everyone. I'll walk you through our Q2 results and then share more perspective on our updated 2024 outlook. Unless stated otherwise, all comparisons are on a year over year basis. Total Bumble Inc. Revenue grew 3% in Q2 to 269,000,000 dollars FX headwinds totaled $3,400,000 to our top line this quarter and impacted our growth rate negatively by approximately 1.5 percentage points.

Speaker 2

Revenue growth was driven by total paying users, which grew 14% to 4,100,000, offset by an 8% decrease in RTPU to $21.37 Bumble app revenue grew 5% to 218,000,000 dollars FX headwinds were approximately $2,500,000 and impacted the growth rate negatively by 1 percentage point. Q2 growth was driven by a 15% increase in paying users to 2,800,000. On a sequential basis, we reported 87,000 paying user net adds with continued strength in international markets. The increase in paying users was partially offset by a 9% year over year decline in our people owing to geographic mix shift. Our people continued to grow year over year within many individual markets, including the U.

Speaker 2

S. Badu App and Other revenue of 51,000,000 dollars declined 2% year over year. FX headwinds were approximately $1,000,000 and impacted growth negatively by approximately 2 percentage points. We grew paying users by 12 percent to 1,300,000 and Q2 net adds were 27,000. Our PPU declined 7% to $11.93 As a reminder, we began including contributions from growth in Vadu App and other KPIs in Q4 of 2023.

Speaker 2

Turning now to expenses. We continue to operate with financial discipline and our 2nd quarter operating expense leverage reflects the cost structure improvements we implemented earlier this year. Total GAAP operating costs and expenses were $217,000,000 for the quarter, down 9% year over year, and Q2 net earnings were $38,000,000 compared to $9,000,000 in the year ago period. The decline in cost was largely driven by a decrease in stock based compensation expense related to headcount reduction, partially offset by one time severance and related charges of approximately $3,000,000 On a non GAAP basis, excluding stock based compensation and other non cash or non recurring items, total costs and expenses were $194,000,000 up approximately 1% year over year. Tutu adjusted EBITDA of $75,000,000 represented a margin of 28% and was up from 26% last year.

Speaker 2

Cost of revenue was $80,000,000 and grew 6%. As a percentage of revenue, cost of revenue was 30% versus 29% in the year ago period, in line with our expectations. Selling and marketing expenses grew 5% to $67,000,000 representing 25 percent of revenue. Our spend was lower than anticipated, primarily due to lower marketing around our Bumble brand relaunch campaign. G and A expenses declined 9% to $27,000,000 or 10% of revenue compared to $29,000,000 or 11 percent of revenue last year.

Speaker 2

Product development expenses declined 17% to $20,000,000 representing 7% of revenue. Decline in product development expenses was primarily related to reduced employee costs as a result of our return actions announced in February. Turning to the balance sheet. We ended the quarter with $287,000,000 in cash and cash equivalents. Since the inception of our repurchase program, we have returned $241,000,000 to shareholders, representing more than 125 percent of our free cash flow over that time.

Speaker 2

Year to date, our total share repurchase is 84,000,000 which represents more than 2.5 times our year to date free cash flow of 31,000,000 $209,000,000 remaining on our $450,000,000 total buyback authorization. Our strong balance sheet and profitability gives us the financial flexibility to continue returning cash to our shareholders. We remain very committed to our buyback program and continue to believe that buying back shares remains a very good use of our capital. Now moving on to our outlook for the rest of the year. We are intentionally resetting our outlook today to reflect the execution of the customer focused strategy that Yani just outlined.

Speaker 2

In the process of strengthening our ecosystem and improving the customer experience, we plan to prioritize product and marketing investments that will improve engagement and ecosystem health, particularly in our more mature market. This will include expanding our efforts around safety and improving the mix and intent of customers on our app. In addition, as we align our revenue strategy to deliver broader customer value across all subscription tiers, we will also slow down certain monetization efforts like Premium Plus that we had originally planned for in the second half of the year. All of these factors in aggregate will impact our near term top of funnel user growth and monetization, but we have high confidence that these are the necessary steps for us to reignite user growth, drive sustainable revenue and capture customer value in the long term. We continue to be encouraged by the strength we are seeing in many of our international markets and expect healthy growth to continue in those in the second half.

Speaker 2

As a result for Q3, we now expect total revenue between $269,000,000 $275,000,000 representing a year over year decline of 1% at the midpoint. Adjusted for FX headwinds, revenue would be flat year over year. We expect Bumble app revenue between $217,000,000 $221,000,000 also representing a year over year decline of 1% at the midpoint. Adjusted for FX, Bumble app revenue will also be flat year over year. We expect Bumble app sequential net adds of approximately $40,000 to $50,000 in Q3.

Speaker 2

We estimate adjusted EBITDA will be between $77,000,000 $80,000,000 representing 29% margin at the midpoint of the range. For full year 2024, we now expect total Bumble Inc. Revenue growth between 1% 2%. We expect Bumble app revenue growth between 1.5% to 2.5% with full year Bumble app net adds of approximately 275,000 to 285,000. This implies that we expect to see negative net adds in Q4 of this year.

Speaker 2

While this is partly driven by seasonality, it primarily reflects the actions I just outlined. Owing to our revised revenue growth outlook, we now expect full year adjusted EBITDA margin expansion of at least 200 basis points year over year. Our outlook reflects the strong operating profitability of our business model, including the benefit of in year savings from our workforce reduction. That benefit has largely been realized as of today, with a small incremental portion to come in Q3. We will continue to exercise operational and financial discipline and take an ROI focused approach to how we invest strategically for Bumble's long term growth in the critical areas that Liliani outlined earlier.

Speaker 2

In summary, we see tremendous opportunity for Bumble Inc. We are making intentional choices today to align our strategy, execution and resources to capture the large long term opportunity ahead of us. While the actions we are taking are difficult in the near term, we are in a healthy position financially as we execute, including our ability to drive strong cash flow while returning capital to our shareholders. And with that, I'll turn it over to the operator for Q and A.

Operator

Thank Our first question comes from Andrew Maroc with Raymond James. Your line is open. Please go ahead.

Speaker 3

Hi. Thanks for taking my question. Maybe one on the 2Q results first and then one on the guide. So given that your comments were that ARPPU is growing within many of your individual markets, with the overall ARPPU decline, driven largely by the geo mix shift, should we infer from that a decline in U. S.

Speaker 3

Paying users? Or can you help us provide any guardrails around the U. S. Versus international paying user or MAU dynamic?

Speaker 2

Hi, Andrew. This is Anil. I'll take that. Yes, I think as we mentioned on the call, we are seeing overall ARPU decline for Bumble App. While individually in each of the markets, including the U.

Speaker 2

S, we are seeing ARPU increase, the weightage of the U. S. Versus international markets is having an impact on overall ARPU. We are seeing some pressure on U. S.

Speaker 2

Top of the funnel metrics and that is flowing through to the pressure that we are seeing on U. S. Payers as well. And a lot of the actions that we are outlining today are effectively meant to really be focused on more mature markets, especially the U. S.

Speaker 3

Okay. Thanks for the color there. And then maybe one on the product roadmap in the context of the guide. I'm sure the roadmap includes some things that are likely to be more impactful than others in terms of the UX and revenue trajectory. I guess, can you provide any further clarity on maybe timing for some of the more impactful moves or just a sense of what groundwork needs to be laid in place product wise before you start to turn on some of the more impactful features?

Speaker 3

Thank you.

Speaker 2

Thank you, Andrew. As we are aligned on the strategy today, we are unveiling a customer centric strategy to really set us up for reigniting growth in the long term. What this means from a product perspective is that we're really optimizing for engagement. As you have heard from our April launch, we saw that improving the customer experience, especially women's experience, drove engagement, which takes longer to realize itself. And that's the set of principles behind the releases and the features that you heard today.

Speaker 2

We are planning to release a series of capabilities, expansion of opening moves, expansion of intentions that will allow us to better align the experience of our customers and balance the ecosystem in but it will take multiple quarters for us to start realizing a top of funnel strength that we believe these capabilities will offer. We also, as you heard today, are really, really focused on ensuring the quality of engagement and the intention of engagement of our users are there for all of our major markets. This has meant that what we started in the first chapter of Bumble in April in raising the bar for profile and quality of profiles in our products is going to expand with our AI photo picker for profile so that we can make more users look great on our platform and get the same level of engagement that we think will help drive overall growth and success of our metrics. So the foundation of what we're delivering is great engagement, great profile creation and increasing the experience bar and safety for women, which will in turn also makes experience great for men. What we'll see is great customer focus from us.

Speaker 2

That's really what the strategy is about. And we will start aligning our revenue model to that and see revenue improvement over quarters.

Operator

We now turn to Cory Carpenter with JPMorgan. Your line is open. Please go ahead.

Speaker 4

Great. Thanks for the questions. I had 2 on Bumble off as well. Maybe, Lydiany,

Speaker 5

for you, could you talk about just at

Speaker 4

a high level what you saw with the initial Apery launch that made you decide now is the right time to make a pivot and reset the roadmap going forward? And then I was just hoping you could expand a bit. You talked about monetization mechanisms that reward positive user behavior. What do you mean by that and what could that look like? Thank you.

Speaker 2

Yes, great question, Corey. Thank you. So what we certainly if we step back a little bit, this strategy isn't just about this past quarter. It is a combination of factors that's laid out on the areas of our plan. If you look at the top of funnel softness that we've talked about, this has been talked about from Bumble over several quarters in the last few quarters.

Speaker 2

We have seen the steady pressure in our results. And what we saw from our April launch is that the engagement has immediately improving our customer experience, improved engagement, but it does instantly immediately in revenue growth. In the past, sometimes a consumable will drive immediate revenue, but doesn't sustain those users. And so what we're really shifting is towards prioritizing product experiences that are going to drive long term sustainable revenue growth. And so what we are focused on is ensuring that the differentiation of why people choose to come to Bumble, which is women's experience, it's a safe, healthy platform for our users is undeniably the best one in the market.

Speaker 2

And so a lot of what you're going to see in our product road map is very focused on the differentiation along also with helping our customers be successful. People come here to meet great people, so we want to have our healthy ecosystem balanced and innovate in our products to help our customers stay here and improve the top of funnel, which is ultimately our goal.

Operator

We now turn to John Blackledge with TD Cowen. Your line is open. Please go ahead.

Speaker 6

Great. Thanks. Two questions. You mentioned sales and marketing, so maybe some changes there. So with the reset, should we expect an increase in sales and marketing in the back half of the year as part of the reset and perhaps to drive top of funnel?

Speaker 6

And then second question, you also mentioned slowing down the Premium Plus rollout. Could you give the rationale for this strategic change? Thank you.

Speaker 2

Yes. Let me start, Josh. On the marketing side, we as you heard from Anub, we are operating with a lot of discipline. We believe we have the right allocation of dollars. What we're really focused on is how do we really optimize for LTV.

Speaker 2

And we are being more tailored about our go to market strategies based on the level of maturity of the market. So the markets where we have greater penetration, we're very, very focused on attracting users that are already aware of our brand, but we're reigniting reengagement, where our strategies for emerging markets are very different and digital and performance marketing are very effective. So it's really about optimizing and tailoring our marketing strategy for markets. I think that's going to certainly drive an improvement to the performance of our investments. And that's our focus.

Speaker 2

In terms of Premium Plus, I want to clarify that we are just maintaining Premium Plus as it is today. We're not changing it. What we are doing is really rebalancing the value of our subscriptions. We believe that before we overinvest in creating additional value for Premium Plus that it's really important that we land the free experience being a great one and ensuring that we have a great value clarity across each one of our subscription tiers. That will in turn improve the top of funnel, which helps every single metric.

Speaker 2

It improves payers, payer conversion and RPPO over time. So it's about rebalancing. We're maintaining Premium Plus in the market as it is. And our focus really is aligning the subscription tiers and value as we add more product capabilities in the next few quarters. And John, just to follow-up on the sales and marketing question.

Speaker 2

From a dollar perspective, we feel truly good about the dollars that we have allocated for the second half. And as a percentage of revenue, you'll actually see Q3, I think, will spend a little bit less than what we spent in Q2. But in Q4, we do intend to take up marketing as a percentage of spend up again. And to Liani's earlier point about making sure that we have the right strategies in terms of how to go to market, I think that's really going to be our focus versus just spending more to get more users.

Speaker 7

Thank you.

Operator

Our next question comes from Ygal Arounian with Citigroup. Your line is open. Please go ahead.

Speaker 6

Hey, good afternoon. I want to go back to the first point, on the 3 important areas you talked about Lydiani and getting the right balance in the kind of customer ecosystem. You guys historically talked about your ecosystem was healthier, leans more towards women and the focus on the women's experience has made a healthier ecosystem. It feels like that maybe has changed or something in the way you look at it has changed and that's leading

Speaker 8

to some

Speaker 6

of the product enhancements or changes you're making here. Is that the case? And can you just talk about that ecosystem and how it's evolved and where it's at right now?

Speaker 2

Yes, great question. So let me unpack ecosystem a little bit. VAML continues to be the best platform for women and it has been a great source of advantage for us. But as we've scale the business, now we are a $1,000,000,000 business in several markets, there has been a slight imbalance that has been created. And it's not just about gender balance.

Speaker 2

It is about intent balance. It's about the general mix of users and what they're looking for. So we're taking a more sophisticated look to that mix of users and engagement and intent because that really will allow us to deliver the best possible experience to our users. That certainly is important for mature markets as you've heard from both Anu and I today. Our markets in the U.

Speaker 2

S. In particular are more mature. We have great brand recognition, great brand love. And it really is about tailoring how we're delivering our experiences, how our customers are experiencing our products in their local markets. And that's what a big part of our shift is all about.

Speaker 2

We believe that's really going to reignite the engine of user growth for us, but it will take us some time. It's complex to get that mixed right and we want to do right by our customers.

Speaker 6

Okay. And to follow-up on that, I guess from last quarter, what look at the magnitude of the change in the full year guidance. Is it possible to parse out what the impacts of the user and monetization changes are here, the near term trade off versus the expectation that the expectations of what the app refresh would deliver over the course of the year? So how much is the new actions? How much is the app refresh not hitting on your expectations?

Speaker 6

Thanks.

Speaker 2

Yes. Ygal, I can take that. So if you take a step back and you break down the guidance in terms of where we were a few months ago versus where we are today, I would say there are 2 main factors in terms of where we see things having changed. So number 1 is around what we are seeing around top of the funnel trends. If you recall, in our Q2 call, we had said that we were seeing some slowness in our top of the funnel.

Speaker 2

And as we went through Q2 and as we've entered Q3, we are seeing those trends continue. Now we had planned for an improvement in these trends coming out of the relaunch, but also due to the work that we were intending to do from a product and marketing perspective. So this wasn't just about what we had planned from a relaunch perspective, but this was around the product road map that we had for the second half of the year. Given the reset in the strategy that you've just heard about, a big part of our second half road map product focus is now much more around ecosystem health and making sure that the engagement metrics that we see are going to be healthy, which will absolutely lead to top of the funnel improvement. But like Adriani said, that will take some time.

Speaker 2

And so that's part of what is built into the reset of the revenue outlook. The second part of what we had built into our assumption around acceleration in the second half was around monetization from features such as Premium Plus that as you just heard about, we have now paused in favor of some more fundamental work that we're doing around our revenue strategy and our revenue architecture. And I want to make it very, very clear that we still believe very strongly that there is a tremendous amount of opportunity in terms of payer conversion and monetization that is still ahead of us. We if you compare payer penetration rates for us versus where you see where the market is, we still are lower than where you see the rest of the market. But we strongly believe that we need to do this fundamental rearchitecture work to set us up for the growth that we know is ahead of us.

Speaker 2

So if you add both of these together, you get to the second half outlook that we've given today, and you can get to the guidance numbers that we have.

Operator

Our next question comes from Mark Kelley with Stifel. Your line is open. Please go ahead.

Speaker 5

Great. Thank you very much. I wanted to go back to kind of the question that Ygal asked, which is about the women first strategy, and maybe not to put words in his mouth, but maybe a departure from that in some respects. And given that your main competitor has a bunch of initiatives aimed at women and trying to add different features and functionality for that cohort. I guess how do we think about the future in terms of being able to differentiate yourself versus that competitor or others in the long run?

Speaker 5

When it seems like in the dating category, some of the apps are just kind of in some respects converging in terms of functionality and messaging? That's my first question. And the second one is you mentioned monetization through advertising on the platform. I guess how do you get that balance right between ad load and trying to make sure that your users are not churning away to competitors? Thanks very much.

Speaker 2

Thank you, Mark. First, let me start with our strategy. As I said at the start of the earnings call today, Bumble was the first app that really focused on women at the center of our experiences. That continues to be the case today. We are not shifting our strategy, because our fundamental belief is when women have a great experience dating, everybody else does.

Speaker 2

And that's the compass in which we're setting this strategy is that we are the best destination for women and we're going to continue to be. So what we're really focused on is it's really important to make sure that not only our product innovation continues to deliver great experiences and safe experiences for women, but also that in turn we are delivering a great experience across the entire ecosystem. So these measures are that we're discussing today are very much centered around what differentiates us inside of the part. So certainly going to be the case, continue to be the case for us. With regards to advertising, we believe that our take here in advertisement is going to be very, very anchored on our customer centric approach to product delivery.

Speaker 2

So we believe there are important and strategic partnerships that will offer ad space to partners that are adding value to the dating journey to our customers. We're going to be very selective and we'll scale this over time, but we see tremendous opportunity for revenue upside, but also added benefit to our customers in terms of their overall dating experience. So it's really about serving the end user in their journey. There's definitely upside both for our customers and for the revenue our business. And that's what we're going to focus on.

Operator

We now turn to Curtis Nagle with Bank of America Merrill Lynch. Your line is open. Please go ahead.

Speaker 8

Great. Thanks for taking the question. Just one for me. So given the step down in the core business and the restructuring and reacceleration efforts taking longer than expected, does it make sense to pause or perhaps pull back on BFF and non romantic relationships at this point?

Speaker 2

Curtis, great question. Our efforts with regards to friendship, especially as we closed the Geneva acquisition on July 1, is very much to give us an opportunity to be where our customers and consumers are. If you look at some of the sentiments, especially younger users as it relates to the category, their starting point is with community creation first. So we believe it's a very connected experience to the future of dating. It's not separate.

Speaker 2

It's an interrelated and very important generational dynamic that we want to be at the forefront of. So that is really the anchor point of how we're tackling community and friendship development as an on ramp to what will become how many of our users start their dating journey. So we think it is an important investment and it is appropriately sized to allow us to gradually grow. And I genuinely believe that there is tremendous, tremendous innovation and opportunity that we can deliver to the business in the long haul in the

Speaker 8

space. Got it. Thanks so much.

Operator

Our next question comes from Nathan Fether with Morgan Stanley. Your line is open. Please go ahead.

Speaker 7

Hey, everyone.

Speaker 4

Thanks for the question. Just taking a little bit more into the revenue deceleration, pulling back from mid teens in 4Q to closer to flattish in its 3Q guide. Can you help us break down the buckets of this weakness between news or growth, retention and monetization? And then when it does come to the changes in the guidance in the back half, is it primarily just changes you're making on the platform and the shift in strategy? Or is there anything macro or consumer that we should be aware of?

Speaker 4

Thanks.

Speaker 2

Sure. So I think if you think about the drivers of growth, Nate, obviously, we have top of the funnel metrics that include new users as well as reengaged users that then sort of become active users on the platform. And then the work that we do to convert those users into paying users. And then the 3rd piece of the puzzle is the work that we do around optimizing prices in each of the markets. As you heard from Liriani, the thing that we've continued to see softness in now for a few quarters is on sort of the top of the funnel metrics.

Speaker 2

Reengage users continue to be strong for us. Where we are seeing weakness is on growth in new users. And like I said, again, the weakness is more predominantly felt in the U. S. And in some of our mature markets.

Speaker 2

Our newer markets continue to be strong in terms of growth there. So the new users is where we are seeing the most impact, which is having an impact on the deceleration that you're seeing in terms of revenue. And there was a second question, Nate, if you don't mind.

Speaker 4

Yes. Just anything in here that is macro or yes, more idiosyncratic? Thanks.

Speaker 2

Yes. I mean, as you can imagine, we are keeping a pretty close eye on the impact of just consumer sentiment and whatever we are seeing in the overall macro environment. We've certainly heard that users, especially younger users, are just more discerning with respect to their spend and are just keeping a closer eye on the amount of money that they're spending on things. So we are baking in some assumptions from the impact of that into our second half outlook. But again, it's something that we're monitoring pretty closely as things change.

Operator

Our next question comes from Shweta Khajuria with Wolfe Research. Your line is open. Please go ahead.

Speaker 9

Thank you for taking my questions. I've got 2. One is, so what specifically is driving your confidence with this new strategy right now at this point in time? Is it some tests that you have run? You sound like this you're confident this is the right strategy going forward, but what is really driving that confidence?

Speaker 9

And then the second is you've been seeing top of the funnel pressure now for several months, maybe a few quarters, especially in the United States. What in your opinion is driving that outside of just the product and user experience? Are you seeing more marketing competition? Are you seeing share shift for any particular reason? What do you in your opinion is driving that?

Speaker 9

Thanks a lot.

Speaker 2

Yes. Thank you for the question. So let me start with the first part. First, I'm really confident that there is a lot of opportunity in this category. We are experiencing a time where users are more lonely than ever, and it is our job in this category to really support connections overall.

Speaker 2

So I am really excited about the opportunities ahead of the category overall. Now for us, if you look at the three parts of our plan that you saw today, there are a number of factors and data that have gotten us to this comprehensive plan. With regards to ecosystem, we have tested and started some of this work in a number of markets, which has really allowed us to start separating the strategies that we want to have across ecosystems. As I mentioned today, our overall business is comprised of thousands of ecosystems. So we're able to really see the dynamics when we have the right balance users in our marketplace.

Speaker 2

So we're really applying our learnings to define this road map and plan for ecosystem health across all of our markets. The second part is our product strategy, which we started earlier this year. One of our key learnings is even as we've raised the bar for profile creation, it kept away from low engagement users and it drove a lot of success in engagement of women, healthier overall conversation across our users. And we know that really drives the word-of-mouth. Customer success drives the engine of growth of-mouth for this company.

Speaker 2

Certainly, it was a huge part of our early success. I still receive letters and stories of Bumble success through throughout people's lives. And that's the core of what we want to get to our product innovation is deliver experiences that help people achieve successful outcomes in a delightful way. And so we have a lot of great data insight and customer evidence that it's the right thing to do. And the final thing that I shared today is our revenue plan.

Speaker 2

We started a revenue rebalancing for Badu about 9 months ago. And the Badu customer is more price sensitive. There's some interesting dynamics. And we're taking some of the learnings there where we've rolled out in a number of markets already. What we've seen is as we've clarified, we brought some value to the lower greater value to the lower tiers.

Speaker 2

It increased the conversion, payer conversion across our customers in Baidu. And we are seeing increase in overall PPU because there is a greater distribution. So there is just a lot of data points and learnings from Baidu that we're going to be amplifying and expanding across Baidu. So we have built this plan with a lot of thought. And what I love the most about Bumble is we have a phenomenal brand.

Speaker 2

We have a loyal customer base. We have great IPs, strong financial to allow us to execute on that in a phenomenally talented team. So we have all of the pieces of the puzzle here and our number one job at this point forward is execute because we believe it will not only drive growth the growth engine again, but it will set us up for success for years to come. Now you talked about top of funnel and the second part of your question was what have we noticed in terms of what's driving that. And as we know with consumer companies, there's always numerous factors.

Speaker 2

Bumble has always been in a competitive segment and industry. So that hasn't changed. It's always evolving, of course, and we pay attention to our competitors. But what we believe is the most important thing to reignite top of funnel is really getting the customer experience to be the best one in the market. And that's what's going to get us to be the number one choice for our customers because the other factors are always going to be evolving and we will always be paying attention to them.

Operator

Our next question comes from Ji An Lee with Evercore ISI. Your line is open. Please go ahead.

Speaker 10

Great. Thanks for taking the question. So a couple. First, just Liana, you talked about this reset could take a few quarters. How should we think about kind of the growth equation exiting this year into the next year?

Speaker 10

Like what should we look for as a leading indicator of success from this reset? Should we see kind of a payer conversion improving top of funnel? Or are people kind of, I guess, recovery path? And second, just to double click on Geneva, pretty interesting acquisition. Can you just talk about the Are

Speaker 8

you kind of considering leveraging these

Speaker 10

techs back into your core apps? Are you kind of considering leveraging these tech stack into your core apps? Any kind of product development around that would be great. Thanks for the time.

Speaker 2

Yes. Thank you. Great questions. From the first part, there are a number of metrics that we are monitoring really closely from consideration, top of funnel, all the way down to conversion and the RP boost strength, as you know. At this point, you've heard our guidance for the second half of the year.

Speaker 2

Our goal is to provide progress and updates to investors in the quarters ahead as we get more insight into our progress on this strategy. But our guidance is the information that we have to share today. With regards to Geneva, you're absolutely right. Geneva has community based capabilities. It has healthy penetration of users in some core cities here in the U.

Speaker 2

S. And what's exciting about connecting with in person with their local communities, with their running clubs, their movie enthusiasts and it's vibrant. People can organize events, they get to know each other. And this is exactly what we believe is going to be a great growth engine for us in the long haul. So we are planning to launch an updated version of Geneva this fall and start scaling it across our markets where we do have a footprint across the Bumble Bank.

Speaker 2

It's a great way for us to engage with a broader set of users. So opportunities to increase our TAM is quite significant here. But it's going to be very grounded on our principles of great customer experience, great experience for women and a safe space. But with any acquisition, as you know, it takes time to get it right. So our goal is to launch it, scale it gradually and we'll be learning what how to evolve and scale this business over the quarters ahead.

Speaker 2

It will take us some time, but we're very excited about the opportunity that they bring us. One final point, you did talk about the tech stack. Geneva has built a fantastic tech stack. We're very excited about how scalable it is. There are definitely technology and capabilities that we can take advantage across the portfolio.

Speaker 2

And that's fundamentally how we're operating as a company. I think that's the key shift here is that we are operating as a customer centric portfolio company and we can take the learnings, the technology, the best practices from all of our apps and apply to each other to accelerate growth for the portfolio as a whole and Geneva certainly will play a role in that.

Operator

We now turn to Benjamin Black with Deutsche Bank. Your line is open. Please go ahead.

Speaker 7

Great. Thank you for taking the question. So just a follow-up on sort of the demographic imbalance you spoke about. Can you just give us some examples on exactly how you plan to resolve the imbalance there, some practical examples? And then one on the recovery, I think the guide implies that revenue growth is going to be exiting a year in sort of a negative trajectory.

Speaker 7

So I guess the question is, how should we think about the shape of the recovery curve? Is this sort of a multiyear endeavor? Or is it something that you could expect to see quicker sort of reversals in the KPIs? Thank you.

Speaker 2

Yes. Let me start with the first part. Great question. So the first part is unpacking ecosystems and the imbalance. As I shared earlier, we're really looking at the balance in a multifaceted way.

Speaker 2

It is ensuring that we have a mix of intent, of users, of backgrounds, of different generations. All of that has a big role in ensuring that when someone gets to Bumble, they find the connection that they're looking for. And it's ensuring that broad set of users will give us more flexibility to help people find each other. And ensuring that also as we talked about today that we have highly engaged, aligned in intention in our ecosystem. So I'll give you an example in terms of some of the techniques.

Speaker 2

There are product techniques, there are marketing techniques, there are revenue techniques. From a product one, as you heard from us today, we've raised the bar in our April launch on profile creation. So users need to add more photos, they have to add more information. That has increased we increased our retention, our engagement of our users, but it kept away some low engagement users. That had an impact on the number of people that kind of passed through the funnel.

Speaker 2

And so that has an impact like has a balance impact of the revenue impact, but has a longer term positive impact to the success of the company. In terms of marketing, there are many different user acquisition strategies in marketing and we can really use it as a core lever to bring the right users in. So we are going to look at the makeup of our mature markets and our emerging markets and ensure that we're applying the right techniques, whether it's performance marketing, whether it's experiential, whether it's very tailored to a particular audience, it will be very specific and personalized to the market that we're playing in. And then from a revenue perspective, promotions and many other pricing techniques can also ensure that the right users are coming into the product. So we are really looking at these three pillars to ensure that the right people are making it to our ecosystem and that they're successful in our product.

Speaker 2

I think that was the full makeup of your question. So hopefully I got it right. Oh, journey for recovery. At this as I shared earlier, we are what I'm most confident about is that we have built a plan that is aggressively and urgently looking at every aspect of our business from the makeup of our customers to our innovation to our revenue. And we are moving as quickly as we can.

Speaker 2

But a plan like this takes time and we're favoring bringing in sustainable revenue to the business because that's going to set us up for long term success. We are going to share progress in the quarters ahead, but don't have any additional time line to share as of today.

Operator

Our next question comes from Ken Garelsky with Wells Fargo. Your line is open. Please go ahead.

Speaker 11

Thanks, perfect. Just a couple, please. First, could you talk a little bit about the significant restructure you did earlier this year? Is there any as you think about that in light of kind of the reset on strategy and the reinvestment phase here, Did that in any way set you up in a more difficult place? Or do you find that the investments you need to make are in different areas with different type of staff, etcetera, with different capabilities.

Speaker 11

So that maybe is my first question. The second question is maybe a broader one, which is the public markets tend to be relatively inhospitable to transition stories with kind of uncertain timeframes. I know you've asked this you've answered this question in kind of multiple ways, but maybe just more directly, how should we just think about timeframes in terms of how you will evaluate the success of kind of the transition here. And anything you can tell us in terms of public milestones? I know you have the second half guidance, but anything you can help us just even if it's not quantitative, more qualitative public milestones?

Speaker 11

Thank you.

Speaker 2

Yes, Ken. Thank you for the question. So on the restructuring part, as you know, in the first half of the year, we restructured about 30% of our workforce. And the principles behind that restructuring was about agility and ensuring that we were optimally organized to execute as a company. I feel really good about where we are.

Speaker 2

We don't have any additional restructuring plans. We are well set up and we have the right talent in our organization to go execute. That was a necessary and important set of actions that we took to put us in a position where we can execute on our strategy and we are well suited to do that. So I feel really good about where we are as a company and as a team. And in terms of what am I going to look out?

Speaker 2

And I don't have a specific time line to share today, which I know is not very satisfying, but there's a few areas that we're going to be evaluating. On the ecosystem side, as we mentioned, the balance of the ecosystem is going to be a key metric that we're going to be looking at internally. And there's many details to and sub metrics to those. And what we have learned based on tasks that we've done is that it takes different windows of time to create balance based on the market. So what we're going to be looking at in the quarters ahead is the velocity and the effectiveness of the different techniques that I talked about just before your question.

Speaker 2

The second factor is we have important product deliverables from the fall through the winter and we are going to be looking at engagement and retention. And that certainly will play a role in helping us understand how the users that are in the ecosystem can be monetized. And on our revenue rearchitecture, part of what we're going to be testing across many markets is the right balance of revenue value creation and revenue extraction out of the value. So as we give more experiences to our users, what's monetizable, how quickly can we realize that set of revenue. So we're going to be learning a lot in terms of velocity of the different techniques in different markets.

Speaker 2

As Anuj said, in emerging markets, we are seeing strength and we're going to continue to invest on those in the near term. But some of our more mature markets will take a little bit longer. Our goal is to provide progress along the way and be transparent with the investor community as much as we can.

Operator

Ladies and gentlemen, that's all the time we have for

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Earnings Conference Call
Bumble Q2 2024
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