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Hello and welcome to the Bumble Third Quarter 2024 Financial Results Conference Call. My name is Elliot and I'll be coordinating your call today. [Operator Instructions]. I'll hand over to Cherryl Valenzuela, Vice President of Investor Relations. Please go ahead.

Thank you for joining us to discuss Bumble's third quarter 2024 financial results. Joining me today are Bumble CEO Lidiane Jones and CFO Anu Subramanian. 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. Descriptions and factors and risks that could cause action results to differ materially from these forward-looking statements are discussed in more detail in today's earnings press release and our periodic filings to the SEC. 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. Reconciliation for the most comparable GAAP measures are available in our earnings press release, which is available on the Investor Invention section of our website at ir.bumble.com. And with that, I'll turn it over to Lidiane.

Thank you, Cherryl, and good afternoon, everyone. In the third quarter, we delivered on our key financial objectives and made good progress on our strategy to deliver sustainable growth for the long term. Total revenue and Bumble app revenue came within our Q3 outlook ranges, while our team's strong operational focus led to adjusted EBITDA for Q3 that exceeded our outlook. We're operating with discipline and generating solid cash flow, which has enabled us to repurchase $120 million in stock since we reported in August. Anu will walk you through more details on the quarter in a moment. In 2024, we embarked on a transformation of Bumble. We've gone leaner as a team. We have attracted top talent to our leadership team, and throughout the organization, we're making better data-driven decisions, and we're increasing the velocity of our execution, including in engineering and product development. We continued to execute on these transformation initiatives in Q3, and I'm really proud of our team and the progress that we're making. The Bumble transformation is foundational to achieving our goals for reimagining Bumble app. On our last call, we shared our priorities for how we're realigning Bumble app to drive our customer success by ensuring they find great connections and ultimately bear forever matches on Bumble. To achieve this goal, we're executing on a vision to build the next generation of online to real-world connections. The plan started with three key initiatives we laid out on our last call, strengthening the core of our ecosystem, driving innovation in customer experience, and enhancing our revenue strategy to ensure we deliver value at every step of our customer's journey. We're off to a strong start in Q3. First, we have rebalanced the mix of our marketing spend to focus on organic strategies in our top tier cities around the world. Effective organic marketing has always been a Bumble differentiator, and we're reigniting that engine. In parallel to the organic efforts, we're optimizing growth marketing investments to higher quality channels that better target the right kinds of user story ecosystem. Early tests of this effort are showing encouraging user acquisition results in one of our growing European markets. In just over a month of testing, we have seen a high single-digit incremental increase in women's registration on Bumble, which has resulted in a meaningful increase in yes votes per day. This data validates the importance of a healthier ecosystem in driving more matches. We're expanding our testing into additional markets in Q4, and we'll continue to gradually expand to larger markets around the world. Our second progress point in the quarter is in further enhancing our policies and safeguards for our customers who value and trust our platform. We're providing our customer support and trust teams with optimized products and tools to increase their response success rate. I believe we're making really good progress here, and I'll give you a couple of examples. We have greatly increased the precision of our routing machine learning models for safety issues brought by our users, driving handling time down to well under one minute. We have also achieved a double digit percent increase in the precision rate for addressing photo moderation issues by enhancing our detection model. Finally, I'm excited to note that we're piloting a generative AI-based Bumble customer service agent to further improve our effectiveness and accuracy in case responses. All of these efforts ultimately support customer experience and satisfaction, and we'll continue to invest to stay at the forefront of trust and safety. Finally, you may have seen that last week we delivered a fall product update to our Bumble app-themed date on your term, which addresses several key customer requests. These include updates to our matching algorithm, which include a new AI model that better predicts matching probability in a new ranking algorithm that helps customers see the most relevant potential matches. Other improvements included the introduction of new interest filters and expanded tools to enable richer interactions for opening moves, including multiple types of opening moves and image-based moves. This release demonstrates our commitment to customer success into operating on a regular product release cadence that continually enhance the experience and ultimately drive engagement. Our initial results give us confidence as we execute on our bigger product vision for Bumble Day. We see this moment as a rare and powerful opportunity for Bumble to shape the future of online dating for the better. Over the last decade, dating apps have been vital to helping customers around the world find love and connection. In that time, customer preferences and needs have evolved. That means our category needs to change, and we're determined for Bumble to lead this change. We do this by delivering a technology-enabled platform that excels at fostering online to real-world connection, helping people find love, friendship, and community in their offline lives. As a brand that defines the core principles of authenticity and trust and empowerment for women, we believe we're the best positioned company to serve the new generation of customers. To deliver on our vision, we have aligned on an exciting roadmap, and we'll be providing more details on our execution plans starting next quarter. I can share today that we have planned for a more expansive winter product release in 2021 that will kick off an ambitious year for our product roadmap. The release will be focused on authentic connections, and we introduced several new features to enable our customers to more easily find authentic and safe connections, including ID verification across the platform, the ability to share my date with trusted contacts to get feedback and gain confidence in their choices, AI-powered photo selection for easier and more authentic profile creation, and a few more surprises that we'll share when the release is launched. Starting out beyond C1, we are establishing a consistent cadence for product releases. In subsequent releases, you would see us take bigger and bolder steps towards delivering dating and connection experiences that are joyful, memorable, and successful. Building a healthier ecosystem and delivering innovative customer experiences are necessary building blocks to driving renewed revenue growth and long-term profitability. While we execute on our ecosystem work and product roadmap, we'll continue to make pricing and paywall optimizations to support conversion and revenue. Longer term, we're focused on achieving the right balance of fee users who enrich the ecosystem while better aligning subscription value with customer success. We see significant opportunities to deliver positive incentives that entice more customers to try our paid offerings while removing friction points in our current paywall. As we make these improvements to our revenue strategy, we'll clearly communicate the value of our offerings to our customers to drive higher satisfaction and ultimately lifetime value. We're excited about our path ahead. We're confident in our direction and our ability to execute. We also know that it would take multiple quarters to achieve our goals as we continue our ecosystem work, roll out our marketing strategies, deliver product innovation, and ultimately drive revenue growth. We value the support of our investment community on this journey, and we're committed to helping you see and measure progress along the way. Now let me move to Badoo and our other apps. Badoo's brand awareness continues to improve since the relaunch earlier this year, and the revenue rearchitecture focused on delivering clear customer value is leading to improved payer conversion. This provides important learning so we're applying to Bumble app. We're also modestly rebalancing some of our marketing investments, and we're optimistic about Badoo's potential. Beyond dating, we're actively working on our product roadmap for friendships and community. I'm delighted to report that Geneva is now live, and we're gradually increasing awareness and adoption, consistent with our prior stated plans to launch this fall. Geneva, as well as BSS, are important to our overall vision of helping more people connect, including non-romantic relationships. We'll have more to share in our plans and progress as we move into the next year. Wrapping up, we're finishing up 2024 highly confident in our transformation path. 2025 is an important year. We're executing diligently on our marketing customer experience and product plans, all of which require investment and necessarily take time to translate into revenue. This is a multi-quarter process, but one we feel is necessary to get right in order to position Bumble for what we believe is an exciting opportunity to lead to the reinvigoration of our category. Our powerful brand and what it stands for, combined with our scale, technical infrastructure, improved cadence of execution, and a healthy financial position, gives us the robust footing on which to build the next generation of online to real world connections. When I mention our powerful brand, it's important to emphasize that we'll never let up in living the values of Bumble and remaining highly visible as a positive force for women. We were a very proud sponsor of our new WNBA champion, New York Liberty, this season, and we're excited to see the market increasingly embrace women's sports. We have also been very humbled to partner with an amazing group of people in raising the profile of the important documentary,

Thank you, Lidiane, and good afternoon, everyone. We delivered third quarter revenue within our outlook ranges while exceeding our expectations for adjusted EBITDA. During the quarter, we executed the discipline to achieve near term results while also working towards setting the foundation for sustainable growth and building towards the vision that Lidiane just shared. While we still have work to do over the coming year, we are confident in our direction and encouraged by the early progress we are making. I'll walk you through our third quarter results in detail and then share our outlook for the fourth quarter. Unless stated otherwise, all comparisons are on a year-over-year basis. In Q3, total Bumble Inc. revenue was $274 million, down 1%, including an unfavorable impact from FX of approximately $1 million. Total paying users grew 11% to $4.3 million, which was offset by a 10% decline in total RP pool to $21.17. Bumble app revenue declined 1% to $220 million, with an unfavorable impact from FX of approximately $1 million. Bumble app paying users grew 10% to $2.9 million. On a sequential basis, we added 52,000 paying users. The increase in payers was offset by a 10% year-over-year decline in RP pool to $25.58. The decline was primarily due to geographic mix shift to international. Badoo app and other revenue of $53 million was 1% lower in Q3, but up slightly, excluding FX impact. Badoo and other paying users grew 14% to $1.4 million, and as Lidiane noted, we began to see the early benefits of Badoo's revenue re-architecture driving improved payer conversion. On a sequential basis, we reported our sixth consecutive quarter of positive Badoo and other payer net ads, which came in at $65,000. Badoo and other RP pool declined 6% to $12.03. Turning now to expenses. Total GAAP operating costs and expenses were $1.1 billion, and we reported a GAAP net loss of $849 million. The loss was mainly on account of a non-cash impairment charge of $892 million that was recorded related to our intangible assets and goodwill. The impairment was triggered by several factors, primarily as a result of a sustained decline in the company's market cap during the three months ended September 30th. On a non-GAAP basis, which excludes stock-based compensation and other non-cash or non-recurring items, total costs and expenses declined 5% to $191 million. As a result, Q3 adjusted Badoo increased 10% to $83 million, or 30% margin, up 290 basis points from the year-ago period. This reflects lower costs from the headcount restructuring program we announced earlier this year, as well as a timing benefit from several planned marketing campaigns being shifted from Q3 to Q4 to better coincide with our October product release. Cost of revenue was $79 million, or 29% of revenue, last year over the year. Selling and marketing expenses declined 5% to $63 million, representing 23% of revenue and down from 24% in the year-ago period due to lower brand spend and lower headcount costs from the reductions we announced earlier this year. G&A expenses declined 17% to $27 million, representing 10% of revenue, down from $33 million, or 12% in the year-ago period. The decrease was due to lower headcount costs as well as lower overheads as we continue to be disciplined about our spend. Product development expenses were $22 million, representing 8% of revenue, flat year-over-year. Turning now to our balance sheet. We ended Q3 with $252 million in cash and cash equivalents, and we generated free cash flow of $92 million in the quarter. Our strong balance sheet and profitability enabled us to continue to return significant amounts of cash to our shareholders this quarter. We remain committed to our buyback program, and since the inception of our $450 million stock repurchase authorization, we have returned $361 million to shareholders, including $90 million that we repurchased in Q3 and $30 million repurchased in Q4. Year-to-date, through Q3, we have returned approximately 140% of our free cash flow via share repurchases. Now moving on to our outlook. For full year 2024, we expect total revenue of $1.066 billion to $1.072 billion, representing growth of 1.6% at the midpoint, in line with our previous outlook. Bumble-app revenue of $861 million to $865 million, which represents growth of 2% at the midpoint, also consistent with our prior outlook. We continue to spend with discipline and expect at least 200 basis points of expansion for our full year adjusted EBITDA margin. For Q4, this implies total revenue between $256 million and $262 million, representing a 5% year-over-year decline at the midpoint of the range. Bumble-app revenue to be between $207 million and $211 million, representing a year-over-year decline of 5% at the midpoint of the range. And adjusted EBITDA of between $70 million and $73 million, representing 28% margin at the midpoint of the range. We expect Q4 2024 Bumble-app pair net ads to decline $70,000 to $80,000. This implies full year Bumble-app net ads of approximately $285,000 at the midpoint, in line with our prior expectations. Looking further ahead, while we are making good early progress with Bumble-app strategic repositioning, we remain in the early innings of the work we are undertaking to strengthen our foundation, reimagine the user experience, and ultimately drive revenue aligned with the value we are delivering. As Lidiane noted, full realization of our work will take multiple quarters. We are making thoughtful investments in marketing, people, and technology to support our roadmap and position us for long-term growth. These investments and our ecosystem initiatives, including product releases, will take time to translate to meaningful revenue growth. And we expect to provide more details on our outlook and plans on our next earnings call. We have strong conviction that the work we are doing will enable us to realize the powerful opportunity in front of us. Our well-loved brand, millions of members, authentic focus on meaningful connections, and robust product vision uniquely position us to lead the reimagination of the dating app category. While we have just begun that work, we see tremendous potential in the future that lies ahead. And our team is laser focused on delivering the experiences that will delight our customers around the world. And with that, I'll turn it over to the operator for Q&A.

Thank you. [Operator Instructions]. First question comes from Ygal Arounian with Citi Group. Your line is open. Please go ahead.

Hey, good afternoon, everyone. Maybe first, understanding, you know, we're not getting 2025 guidance here, but also as we think about the progress that you guys have seen so far, which is nice to see, trying to balance that out with the comments around, you know, how it'll take time to play out multiple quarters. Just any more help in how to think about the products that are contributing, you know, the kind of curve of the contribution and, you know, how any other kind of benchmarks that we should be thinking about or looking to as we make the progress here?

Thank you for the question. You know, when you look at our investments, as I outlined last quarter and emphasized again this year, we're really focused on three primary areas. Strengthening our ecosystem. As I mentioned today, we're really excited about the early progress that we're seeing on the test market. That means ensuring that we have the most engaged customers across the ecosystems that we play in and we're seeing really positive signs that our investments are moving in the right direction from engagement and growth of customers. The second is ensuring customer success. And we're focused on success end to end, from customer support to safety to innovative experiences on our product. So the fall roadmap is very incurred, fall release that we just launched last week, very incurred on customer success. Our winter release is going to take even bolder steps at innovating. And aligned to that is the third major initiative, which is really reimagining and evolving our revenue strategy to ensure across every one of our subscription tiers we're offering value to our customers and that they feel really good about the value that they're getting across each one of them. So we're looking at all of that. We're really optimistic from the progress that we've seen in Q1. We're extending the markets that we're doing this marketing balance and customer acquisition balance. And we will be providing more in the quarters ahead, but definitely confident that we're in the right track.

Thanks. And maybe just a follow-up on, maybe this is more for a new, but on the buybacks at 140% of free cash flow this year, you've set that up. It looks like that's continued here in the early part of 4Q, balancing with margin expansion and investments that you think are needed to kind of move the product in the right direction. Just philosophically how you're thinking about that? Thank you.

Yes, sure. Happy to go. So I think if you think about our capital allocation philosophy, as we've always said, we think about it in sort of three broad buckets. The first one is around investing in our organic growth and making sure that we're continuing to invest for the revenue growth that we know we have ahead of us. The second one is around M&A. We've said in the past that we continue to be opportunistic from an M&A perspective with a pretty high bar for what that looks like. And the third one is to return capital back to shareholders. And we have the buyback program in place. We are always trying to balance each of these priorities depending on what's most critical to us. So I think going forward, you'll see us continue to take a balanced approach. I think for next year, you know, having top line growth is definitely going to be one of the most important things we are focused on. So you'll definitely see us focus on that as a company. And then we obviously have our buyback program, which we will continue to be opportunistic about.

Thank you, Anu.

We now turn to Shweta Khajuria with Wolfe Research. Your line is open. Please go ahead.

Okay. Thank you for taking my questions. Let me try two, please. First is on ecosystem health, Lidiane. Of the three things you talked about, the first one is ecosystem health. It includes profile creation and maybe a shift in marketing strategy. And you've addressed both of these. So I guess my question is, could you please provide specific examples of other actions that you have taken in the quarter and or plan to take in the near term that focuses on rebalancing the health of the platform that you think will be most impactful? That's question one. And the next question is on customer experience. How should we think about the headwind on top of the funnel from your safety initiatives? And is it fair to say that you started that initiative mainly in the third quarter this year? You'll come to that next year post Q2. Thanks a ton.

Yes, thank you. On the first part of your question, definitely a marketing rebalance for us to ensure that we're acquiring the right types of users. And that has been really positive. In addition to that rebalance, one of the key efforts I mentioned in my prepared remarks is about strengthening organic marketing, especially in our mature markets, which has also shown really positive signs. The other efforts here for us when we think about healthy ecosystem is related to product innovation. We are embarking on this new model of a regular product cadence so that we operationally are constantly innovating for our customers. So what you're seeing from our fall release or to winter and you'll see more into 2025 is a regular cadence of innovation. What that does is ensuring that we're also attracting and retaining great customers that are going to have great experiences with that and success within our portfolio of apps. So we're really excited about ecosystem is about certainly acquiring but also retaining our customers. So you're going to see a lot of that from us in the quarters ahead. When we think about customer experience and safety, there are many things here related to safety that we look at. And it's not just you shouldn't think of safety just as a headwind. It's also an important attractor for a lot of our customers. So there's a few key things in earlier this year. We have already started to improve our modeling to ensure that we are for photo modulation, for example, as you saw in my prepared remarks, ensures that good customers that are interested in being in our ecosystem are not unfairly blocked. So that is actually welcoming more customers into our ecosystem that we're not getting through because of our modeling issues. So there's many efforts there. Additionally, capabilities like ID verification that will be optional for our customers, again, gives customers a lot more choice and feel the safety that they would like to have in our ecosystem. So we think safety capabilities are both about keeping customers safe, attracting the right customers and retaining an addition to ensuring that we don't have users that we don't want in the ecosystem. So all in all, we are optimistic about those as positive investments for user growth.

Thank you, Lidiane.

Thank you.

Our next question comes from Eric Sheridan with Goldman Sachs. Your line is open. Please go ahead.

Thanks so much for taking the question. Just one, if I could, just sticking on the theme of the potential and the revenue and the user side for Badoo over the longer term. What continue to be key learnings about that as an asset in your portfolio and how it informs key priorities for that part of the business looking out of the medium to long term? Thanks so much.

Thank you, Eric. This year, we took a very customer centric approach to Badoo, because Badoo does serve a customer base that's complementary to our Bumble customer base. And with the changes that we made on the product, we did a brand relaunch, we're rebalancing, modestly rebalancing our brand and growth marketing to Badoo. And what we're seeing is that we're seeing a positive engagement in the customer base, as well as benefits in ARPPU from customers getting the right value from our revenue, the architecture. So we're optimistic about Badoo. I think Badoo, in the right investments, with the right placement within our portfolio, can have greater potential in the medium to longer term. So definitely optimistic about the role Badoo can play for us.

We now turn to Nathan Feather with Morgan Stanley. Your line is open. Please go ahead.

Hey, everyone. Thanks for taking the question. Two on my end. First, are you seeing any green shoots with Gen

Thank you, Nathan. In terms of engagement, positive engagement, Q3 has been a really positive one for us from a marketing perspective, with our shift towards reigniting organic marketing for Bumble, which has always been part of our DNA, has always been a differentiator. That has been an incredibly positive set of outcomes for us from Gen

And Nathan, in terms of impact to the way we thought about Q4, we don't really think that there's been a big impact in terms of what we've seen leading up to the election. So we are guiding to a revenue outlook that is largely consistent with what we guided to in our Q2 running, so not much to report on that.

Great. Thank you.

Our next question comes from Benjamin Black with Deutsche Bank. Your line is open. Please go ahead.

Great. Thank you for taking the questions. So, you know, in the past, you've obviously spoken about the free experience and how you think that may need to evolve in an effort to help the ecosystem. So I'm curious, you know, how do you expect the free experience to change over the next coming quarter, if not years? And then maybe as we think ahead to 2025, I've understood that we're not getting any guidance. But, you know, if you think about the product release plans toward the end of the year, generally speaking, you know, how should we think about the composition of growth? You know, sort of between, you know, payers and our people as we head into the New Year? Thank you.

Great, Benjamin. Let me start with the free experience first. You know, we recognize that this is a really important moment for the company to get right. And a key part of our revenue evolution is ensuring that we're getting the fundamentals right for our customers and their experience. So we are taking a step back and looking at the entire journey from top of funnel all the way to the most optimized subscription tier that we have, which is premium plus. And so, of course, in that journey comes the free experience. We really believe that a great free experience for all of our customers should also be one that helps people see the value of Bumble right from the get go. And that will positively entice them to want to pay to get greater value. So in that regard, we see greater opportunities in the near term to increase our conversion rate from free to pay with some of the initiatives that we're going to drive in the next few quarters. So we're quite bullish and excited about that. Secondly, is that as we are innovating our product rhythm and the cadence and the regularity and the velocity of our innovation, I think a big part of what I've been talking about in this last couple of earnings has been the company transformation that we're undergoing. It's really ensuring that we're innovating at a fast pace that we are attracting the best talent in the industry. And that's going to really help us bring a greater degree of innovation that will increase the value creation for higher tiers. So really a lot of excitement for us in terms of the value of our subscription tiers and the rearchitecture of our value balancing for our customers. But I'll pass it on to Anu to talk a little bit more about the second part of your question.

Hey, Ben. So as you can imagine, we are deep in the middle of planning for next year. And this encompasses the work that we are doing around the three pillars that Lidiane talked about, which is customer experience, ecosystem work, as well as reimagining of the revenue and subscription experiences. And this will impact how we think about our key KPIs in terms of user growth, payer growth, revenue growth, et cetera. And we've talked today a little bit about some of the tests that we are running and the early results that we're seeing from all of these, which have been quite encouraging. I think it's a little bit early to talk about specific puts and takes around how this translates into some of the metrics that we look at. But we look forward to providing more details on our next earnings call, for sure.

Great. Thank you very much.

Our next question comes from Robert Coolbrith with Evercore ISI. Your line is open. Please go ahead.

Great. Good afternoon. Thank you for taking our questions. I wanted to ask if you could go back to the marketing tests that you've done in Europe and the related uplift or improvements in ecosystem balance that you're driving there. Anything more you could tell us about the changes in channel mix or messaging and the plan to expand that strategy? And then also understand that you're more focused on organic and the more established markets. But just wondering if there are any learnings from the targeted marketing that you can apply to some of the more established, more mature markets to maybe accelerate the drive toward ecosystem health and demographic balance? Thank you.

Yes, Robert. Great question. So for emerging markets, there is both a balance of brand expansion and awareness as well as a very tailored marketing channel mix. And so one of the greatest things that I am excited about in K3 is how rapidly we're ensuring our marketing insights and operations to allow us that effectively. And what we have seen is in this particular market, we have balanced for a greater investment on acquiring the right users, particularly demographic, especially women in this case. And we were very effective at that acquisition with the right ROI. So that's very positive in such a short amount of time. For more mature markets, what we have done, as you noted, is balancing with organic because the brand awareness is already there. And it's really about delivering a set of broader experiences for our users. New York is a great example of a market that we put a lot of effort and saw really positive results in a single quarter. And the great thing about holding an organic event in New York, like sponsoring the WNBA and having events where our customers can be a really big part of that, is that it also amplifies digitally through our social channels, through customers that are telling their own stories. So there is a positive scaling of that as well that we're excited about. So the key message here is that we are being very thoughtful and deliberate about our marketing strategies based on our presence, as well as the brand awareness of the markets that we're in. An exciting thing from my perspective is from an international expansion, MOMO is a fairly young company, still in many markets. And so we have a great opportunity to drive international expansion and growth over the quarters ahead.

Great. Thank you.

Thank you.

[Operator Instructions]. We now turn to Laura Champine with Loop Capital. Your line is open. Please go ahead.

Thanks for taking my question. If I work through your outlook, there's certainly a scenario for sequentially lower margins in Q4. Would that come from higher advertising spend or is there something else there that I might be missing?

Yes, hey, Laura. So if you look at our full year EBITDA margin outlook, we've maintained what we had said previously, which is to expand our margin by at least 200 basis points. So there's no change to our full year outlook. In Q3, we came in ahead of where we had expected to be from a margin perspective. And it was primarily because we shifted some marketing spend from Q3 to Q4 to sort of better coincide with the fall release that we just had in October. So that's why you see Q4 margin being lower. And as you said, it will be because of higher marketing spend. But in aggregate, our plans in terms of what we intend to do for the full year has not changed. It's just a shift in spend between Q3 and Q4.

Understood. Thank you.