Online dating app Bumble (NASDAQ:BMBL) reported results in line with analyst expectations in Q1 FY2023 quarter, with revenue up 15% year on year to $242.9 million. The company expects that next quarter's revenue would be around $256 million, which is the midpoint of the guidance range. That was roughly in line with analyst expectations. Bumble made a GAAP loss of $2.33 million, down on its profit of $23.9 million, in the same quarter last year.
Bumble (BMBL) Q1 FY2023 Highlights:
- Revenue: $242.9 million vs analyst estimates of $240.9 million (0.84% beat)
- EPS: -$0.01 vs analyst estimates of $0 (-$0.01 miss)
- Revenue guidance for Q2 2023 is $256 million at the midpoint, roughly in line with what analysts were expecting
- Free cash flow of $6.58 million, down 85.7% from previous quarter
- Gross Margin (GAAP): 70.9%, down from 73.2% same quarter last year
- Total Paying Users (inc Bumble and Badoo users): 3.46 million, up 453 thousand year on year
Founded by the co-founder of Tinder, Whitney Wolfe Herd, Bumble (NASDAQ: BMBL) is a leading dating app built with women at the center.
Online dating apps have disrupted the more traditional ways that people meet romantic partners, by greatly expanding the pool of potential dating partners, allowing people to more readily find those with shared common interests. Today, approximately 40% of couples now meet Online in the U.S., up from 20% in the early-2000s.
Bumble operates two dating apps – Bumble and Badoo. The Badoo app, founded by Andrey Andreev and launched in 2006, differentiates itself by its mantra of “Date Honestly” which is meant to be a mix of both dating app and social discovery app, where one can meet friends with similar interests. It is the market leader in Europe and Latin America.
Bumble launched in 2014, with the innovation of giving women the authority to make the first move under the premise that women would feel more confident and empowered, resulting in higher engagement than on other dating apps. As a result, within North America, Bumble has more female users for every male user than any other dating app, an indication of how well the product resonates with its users. Along the lines of being women-centric, Bumble was one of the first major dating apps to launch automated photo verification (ensuring matches are real people), develop in-app video chat, use machine learning to blur lewd images, and ban obscene images, all with the intention of improving the comfort level of meeting in person. Bumble has also added other mental health resources like a crisis support line, suicide prevention lifeline, and stress management tutorials, all of which bolster its reputation of being a safer, kinder, and more accountable dating app experience. The app itself is simple and works similarly to Tinder, profiles of potential matches are displayed to users, who can "swipe left" to reject a candidate or "swipe right" to indicate interest.
Consumers today expect goods and services to be hyper-personalized and on demand. Whether it be what music they listen to or what movie they watch, or finding a date, online consumer businesses today are expected to delight their customers with simple user interfaces that magically fulfill demand. Subscription models have increased usage and stickiness of many online consumer services.
Bumble (NASDAQ:BMBL)’s online dating peers include direct rivals Match Group (NASDAQ:MTCH) and Spark Networks (NYSE:LOV), along with social networks like Snapchat (NYSE:SNAP) and Meta Platforms (NASDAQ:FB).
Bumble's revenue growth over the last three years has been strong, averaging 24.9% annually. This quarter, Bumble reported a moderate 15% year on year revenue growth, in line with analysts' expectations.
Guidance for the next quarter indicates Bumble is expecting revenue to grow 17.4% year on year to $256 million, in line with the 18.5% year-over-year increase in revenue the company had recorded in the same quarter last year. Ahead of the earnings results the analysts covering the company were estimating sales to grow 18.7% over the next twelve months.
As a subscription app, Bumble generates revenue growth by growing both the subscriber base and how much each subscriber spends over time, on average.
Over the last two years the number of Bumble's active buyers, a key usage metric for the company, grew 10.9% annually to 3.46 million. This is decent growth for a consumer internet company.
In Q1 the company added 453 thousand active buyers, translating to a 15.1% growth year on year.
Revenue Per Buyer
Average revenue per buyer (ARPB) is a critical metric to track for every consumer internet product and for Bumble it measures how much the average active buyers spends, one key indicator for how valuable its buyers are and can be over time.
Bumble’s ARPB growth has been decent over the last two years, averaging 7.82%. The ability to increase price while still growing its active buyers shows the value of Bumble’s platform. This quarter, ARPB shrank 0.02% year on year, settling in at $70.22 for each of the active buyers.
User Acquisition Efficiency
Unlike enterprise software that is typically sold by sales teams, consumer internet businesses like Bumble grow by a combination of product virality, paid advertisement or incentives.
Bumble is efficient at acquiring new users, spending 38.1% of its gross profit on marketing over the last year. This level of sales and marketing spend efficiency is indicative of a relatively solid competitive positioning, which gives Bumble the freedom to invest its resources into new growth initiatives.
Earnings & Free Cash Flow
Investors typically look at a company’s operating income to get a sense of how profitable a core business is. Adjusted EBITDA is the most common profitability metric for consumer internet companies, similar to operating profit, but removes various one time or non-cash expenses to give a more normalized measure of profitability.
Bumble reported EBITDA of $59.3 million this quarter, which was a 24.4% margin. Over the last four quarters Bumble has demonstrated a very strong profitability with average EBITDA margins of 25.3%.
If you follow StockStory for a while, you know that we put an emphasis on cash flow. Why, you ask? We believe that in the end cash is king, as you can't use accounting profits to pay the bills. Bumble's free cash flow came in at $6.58 million in Q1, down 54.2% year on year.
Bumble has generated $108.8 million in free cash flow over the last twelve months, 11.6% of revenues. This strong FCF margin is a result of Bumble asset lite business model and provides it plenty of cash to invest in the business.
Key Takeaways from Bumble's Q1 Results
With a market capitalization of $2.44 billion Bumble is among smaller companies, but its more than $389 million in cash and positive free cash flow over the last twelve months put it in a very strong position to invest in growth.
It was great to see that Bumble’s user base is growing, and users slightly beat expectations. On the other hand, revenue growth is overall a bit slower these days and both revenue and adjusted EBITDA guidance for the next quarter missed analysts' expectations. Despite this, management stated that “We believe the momentum in our business sets us up well to continue delivering profitable growth and we are reiterating our guidance for the full year.” Overall, it seems to us that this was a complicated quarter for Bumble. However, the company is up 4.48% on the results and currently trades at $18.43 per share.
Is Now The Time?
When considering Bumble, investors should take into account its valuation and business qualities, as well as what happened in the latest quarter. We think Bumble is a good business. Its revenue growth has been good, and that growth rate is expected to increase in the short term! On top of that, its EBITDA margins point towards strong profitability of the core business , and its strong free cash generation allows it to sustainably invest in growth initiatives.
At the moment Bumble trades at next twelve months EV/EBITDA 8.2x. There is definitely a lot of things to like about Bumble and looking at the consumer internet landscape right now, it seems that the company trades at a pretty interesting price point.
The Wall St analysts covering the company had a one year price target of $25.7 per share right before these results, implying that they saw upside in buying Bumble even in the short term.
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