Bumble Inc. (BMBL) Q4 2021 Earnings Report, Transcript and Summary

Thank you for standing by, and welcome to the Bumble Fourth Quarter and Full Year 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question-and-answer session. [Operator Instructions]. As a reminder, today's conference call is being recorded. I would now like to turn the conference over to your host, Ms. Cherryl Valenzuela. Ma'am, you may begin.

Thank you, and thank you all for joining us to discuss Bumble's fourth quarter and full year 2021 financial results. With me today are Whitney Wolfe Herd, Founder and CEO; Tariq Shaukat, President; and Anu Subramanian, CFO of Bumble. Before we begin, I'd like to remind everyone that certain statements may be made on this call today that 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 statements to reflect changes that occur after this call. Descriptions of these factors and other 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-K for the year ended December 31, 2020, and our subsequent periodic filings. For purposes of today's call, comparisons to full year 2020 are based on the company's results for the combined period of January 1, 2020, to January 28, 2020, and January 29, 2020 to December 31, 2020. 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 Whitney.

Thanks, Cherryl. Good afternoon, and thank you all for taking the time to join our call today. I'd like to start with Russia and Ukraine. I know this is top of mind for everyone. First and foremost, our hearts go out to all who are impacted by this tragic conflict. We hope for a Swift Resolution to the situation. We are a mission-driven company. Given the current circumstances, our presence in Russia is inconsistent with our values as a business. We are, therefore, discontinuing our operations in Russia and removing all of our apps from the Apple App Store and Google Play Store in Russia and Belarus. We do not take this decision lightly, and we've been working tirelessly to ensure the safety and well-being of our team in the region. However, we believe this is the right decision, reflecting who we are and what we stand for. Here are the facts about our presence in Russia. For starters, substantially all of our technical workforce, including product development, data science and engineering is based in the U.S., UK and Spain. For example, 95% of our dedicated Bumble app software development teams are based in the UK and Spain. Similarly, our entire cybersecurity team is based outside of Russia, primarily in the UK. None of our senior leadership team is based in Russia. Out of our 980 global employees, only 120 team members are in Russia. While we value all of our team members in Russia, and we're working with each of them on a case-by-case basis, the skill set of our team in Russia is replicated in our engineering centers outside of Russia. Additionally, we have made a number of changes since 2020, such as the establishment and scaling of our Barcelona engineering hub, the creation of additional EU data center locations and the expansion of our US-based leadership team, all of which gives us great confidence in our ability to make this exit a smooth transition. Additionally, we have no employees in Ukraine or Belarus. Looking at our operations, no part of Badoo App or Bumble App and none of our user data are hosted or stored inside of Russia. We use data centers in the EU and U.S. to serve our applications globally. The only user data that lives in Russia is a backup of Russian customer data as required by local laws. In 2021, Russia, Belarus and Ukraine together amounted to only about 2.8% of total company revenue, less than 0.1% of Bumble App revenue is from Russia, Belarus and Ukraine combined. We are factoring the impact of this situation into our outlook, and Anu will provide more information about this shortly. Now, let me turn to our results. Looking back to 2021 was a very strong year for us. I'm very proud of the strong business that we have built, which combines organic growth and engagement at scale with profitability and cash flows. For full year 2021, group revenue increased 32% year-over-year to $766 million, an acceleration in growth rate from 19% in 2020. This growth was driven by Bumble App revenue at $533 million, which grew 48% year-over-year compared to 31% in 2020. We grew our global scale with continued success throughout the Americas, Europe, India and Southeast Asia and reached 2.9 million paying users for the year, up 16% and average revenue per paying user, ARPPU, up 15% year-over-year. All of this was achieved while generating higher profitability. Our 2021 adjusted EBITDA increased 36% year-over-year to $207 million, representing a 27% margin versus 26% in 2020. In Q4, we delivered record revenue of $208.2 million and adjusted EBITDA of $55 million, continuing the strong traction we saw all year. Again, this was driven by the strength of Bumble App while Badoo faced some headwinds related to Omicron and FX. According to third-party data sources, as of December 2021, Badoo remains the second most downloaded dating app in the world. And Bumble App is now the third most downloaded dating app globally, up from number seven in early 2020. We were thrilled to welcome Fruitz last month, adding an exciting and rapidly growing dating app targeting Gen Z to our group. So now, let me update you on each of our apps. Bumble App continues to accelerate growth and gain share. Our brand continues to be a powerful engine of organic growth, with Q4 revenue growing 42% to $150.5 million. Bumble paying users reached more than 1.6 million in Q4, up 29% year-over-year and up 108,000 paying users sequentially, both accelerations from the 20% year-over-year growth and the 60,000 net adds we reported in Q3. This reflects the power of our mission first brand, the strong engagement on our platform, our international expansion efforts and continuous improvements in our monetization strategy. I'm particularly happy to report these results to you on International Women's Day. Women's equality is core to our mission and a driving force for our success. We are so proud that over 50% of our management team and over 70% of our Board members are women. Bumble's app success is built on five pillars. Our Women's first brand, centered on building safer, kinder technology for all, product experiences that engage our users in an impactful way, helping them find dates, friends and community; the pace and momentum of our international expansion; alongside share gain in core markets; the introduction of new paid experiences and tiers; and expansion beyond dating. We believe that one of Bumble's core unique strength is how well the brand resonates with both women and men globally. We've seen this with our success in markets has varied as the U.S., Indonesia, India, Germany and Mexico. Our brand is our moat, and we continue to invest in it through a wide range of channels, including organic and digital marketing, our college ambassador programs and our user safety initiatives. We continue to be a leader in advocating for new laws and regulations to curb online abuse and harassment. We believe in driving trust, kindness and accountability on the Internet. And we believe this is a critical initiative that we are so proud to be leading. We led the charge in Texas several years ago to criminalize sending unsolicited nude images, an activity we called Cyber flashing, and we have seen this campaign advanced in several other states in the U.S. as well as the UK. On the product side, we were excited to see our efforts recognized by Apple, who named us one of their Top 15 Apps of the Year for 2021. As a reminder, our product development strategy is always to help users find the most relevant matches, quickly and safely. This is the key to achieving our mission of healthy and equitable relationships. We do this through continuous optimization of the user experience, a strong discipline of AV testing and sophisticated machine learning and data science-driven personalization, as well as new and engaging features. This approach continues to pay off with our key engagement metrics continuing to increase year-over-year in Q4. We have a very active product development calendar plan for 2022. Our focus has moved from post-match experiences, which were important to our success at the height of the COVID pandemic to prematch discovery experiences. We are listening to our users' request for more tools to express themselves and are innovating our video and audio features, providing more opportunities to use Bumble to connect in the life and more ways to find people who have the same interest and passion system. We are actively developing and testing a range of new features and experiences that will improve the product for college students, LGBTQIA+ users and women users on our platform, just to name a few. You'll start seeing these features deployed at scale in Q2 and in Q3 just in time for the peak summer season. In terms of international expansion, we continue to see tremendous success outside of the US. Active user growth in many markets in Western Europe, including Germany, Netherlands and Switzerland, continued to grow at high double-digit rates year-over-year. These countries are also monetizing at a strong pace, with revenue more than doubling year-over-year. Our expansion to other parts of Europe, LatAm, India and Southeast Asia also continued to strengthen. Our organic, brand-driven approach to international expansion is a unique asset of our company, and it's proving itself around the world. As we've said before, our goal is to have a broad range of people and Bumble app become a paying customer, by creating a menu of experiences that add substantial value to each of them. Today, approximately 10% of our users pay for any service on Bumble. And we know there is substantial room to grow that number. Our approach to this in 2020 and 2021 was to introduce a premium tier on top of our existing boost tier with additional new features that are additive to a user's experience. More than 75% of paying users are now opting for Bumble premium when they subscribe, which is a great sign of the value that it provides. Our two tier model has resulted in substantial improvement in ARPPU this past year, with 2021 ARPPU of $29.61, up 13% year-over-year. In 2022, we are broadening our approach. This quarter, we're testing those virtual goods and new consumables, and we expect wider rollout in Q2 and Q3. We also expect to roll out segment-specific subscription offerings later this year. We believe these initiatives will increase revenue by enabling us to target additional price points and user segments. We're excited by all of these initiatives, not just because of their revenue impact, but because we believe that they'll add a lot of value, fun and excitement to the Bumble experience for our customers. Lastly, beyond dating. We are excited about the improvements that we've made to our current BFF friend finding product, including the onboarding and discovery flow and anchoring the products around interest and passion. As a result of these initial changes, BFF is growing strongly with almost 15% of total Bumble users now using Bumble BFF, up from about 10% a year ago. This increasing engagement continues to drive stickiness and lifetime value of our users and serves as a great on-ramp to dating and back again. We are innovating quickly here. In Q4, we launched our next-generation features and testing with users in Canada. And we're very pleased with the market reception we have seen. Building on the popular existing use case of creating direct one-to-one connections, the next generation takes into account that many great friendships are often born at a small group interactions. We're building out these new capabilities that will allow groups of people to really build community and meet each other based on shared interest, joys and struggle. We are now scaling the test and adding new features, including larger group connections and audio/video capabilities. Our focus for 2022 continues to be on scaling and refining the user experience so that we can roll this out to our broader customer base. We grow more and more excited about the runway for BFF and the importance of it to our overall Bumble brand, mission and growth strategy. Now turning to Badoo App and Other. Q4 revenue was down 3% year-over-year to $58 million. Badoo-paying users totaled 1.3 million in Q4, a sequential increase of 5,000 paying users, largely driven by stabilization post the Android payment issues that we discussed in Q3. Badoo's results in Q4 were negatively impacted by several factors, including Omicron, especially in late Q4 as well as greater-than-expected FX headwinds in the quarter. I would like to remind everyone of some of the dynamics at play here. Badoo is a scaled product, the second most downloaded dating app in the world and the top grossing lifestyle app in over 90 countries. It caters to a middle-class segment in virtually every market that it operates in and it's designed to thrive in a world of quick connections, with a significant feature of being an instant connection service called Talk to Someone. COVID has caused significant disruption to this user base, putting increased stress on their finances and their available free time. So the focus on quick connections is also less appealing during COVID surges such as with Omicron in late December and early Q1, leading to new registrations being challenged. To be clear, this impact has been limited to Badoo. We do not see any notable impact on Bumble app due to geographic and demographic differences. Our download share has generally been stable throughout the pandemic. Our goal is to lean into this large global audience through product initiatives that give people more tools to express themselves and have fun in the process. For example, by continuing to roll out our video broadly and increasingly leveraging the virtual coins ecosystem that we've had in place for many years to drive increasing monetization. I'd like to now touch on how we're building out our scale with our first acquisition. I am thrilled to welcome Fruitz to Bumble Inc's family of apps. I have long admired the approach Fruitz have taken to encourage honesty and transparency in dating, which is so important to us and aligns with our mission. Fruitz is the fast-growing dating app with a Gen Z focus and a strong and rapidly growing footprint in Western Europe and Canada. Since it was founded four years ago, it's captured a sizable user base. 75% of which are Gen Z. And in Q1, Fruitz was the second most downloaded app in its home country of France. It's built on the principle that from users very first interaction they must select a profile Fruitz badge as this metaphor to clearly signal their dating intention. Gen Z is an incredibly important audience for us. They are the future. The 2 billion Gen Z generation is estimated to account for $3.4 trillion of global spend and is rapidly aging into dating app usage with this very distinct set of needs and preferences. And while Bumble app continues to drive significant user growth with Gen Z, we know that people have multiple dating apps on their phone, and we're so excited to build Fruitz into a strong accompaniment to Bumble on Gen Z devices globally. There is great product market fit overall. And we just really believe that combining that with our integrated technology, data clients, safety and marketing platforms, we'll really help them reach their full potential more quickly and efficiently. In closing, the world needs love more than ever before. We are so proud to be in the business of serving this critical human need. As I think about 2022, I'm very optimistic about the state of our business and the opportunities ahead for us. So with that, let me turn it over to Anu for a run-through of our financial and operational results.

Thanks, Whitney, and hello, everyone. I will first talk about our fourth quarter results and full year 2021 performance, and then I will provide our outlook for Q1 and full year 2022. We closed out the year with strong performance in Q4. Total revenue for the quarter was $208.2 million, up 26% year-over-year. We saw stronger-than-expected headwinds from FX, especially in late Q4, which impacted revenue negatively by approximately $1.5 million year-over-year. Bumble app revenue was $150.5 million for the quarter, which was up 42% year-over-year, an acceleration from the 39% year-over-year growth rate in Q3. Bumble App paying users reached 1.6 million in Q4, up 29% from last year, with broad-based contribution across geographic regions. The product initiatives, Whitney described earlier, have not only helped drive engagement, but also translated into payer penetration improvements across the app. On a sequential basis, we added 108,000 paying users, due to product improvements such as the change in the placement of BeeLine, payer optimization initiatives and the reversal of Android payment changes. Bumble apps ARPPU, was $30.57 in Q4, up 10% year-over-year due to two-tier geo-segmentation pricing and the extended spotlight consumables launched in Q3. ARPPU declined 1% on a sequential basis, driven mostly by FX and impact of country mix from strong international expansion. Badoo app and other revenue was $58 million in Q4, which was down 3% year-over-year. This includes a $1.2 million year-over-year negative impact due to FX headwinds. As Whitney mentioned, Badoo's monetization continues to be more impacted by COVID, than Bumble app. Badoo's paying users were 1.3 million in Q4 and were down 6% year-over-year. On a sequential basis, we added 5,000 paying users and saw a steady recovery from the Android payments issue we saw in Q3. Badoo ARPPU grew 2% year-over-year to $13.33, but decreased 3% on a sequential basis, largely on account of FX headwinds in Q4. Turning now to Q4 expenses, total operating expenses grew 14% year-over-year. Cost of revenue, excluding stock-based compensation, was $54 million and grew 22% year-over-year, primarily due to increase in in-app purchase fees on account of higher revenue. This represented 26% of total revenue. Sales and marketing expenses, excluding stock-based comp, totaled $57 million or 28% of revenue, in line with 28% we spent last year. G&A expenses, excluding stock-based comp, were $37 million. And product development expenses, excluding stock-based comp, totaled $14 million or 7% of revenue. Attracting and investing in world-class tech talent, continues to be a top priority for us. Q4 adjusted EBITDA grew 24% to $55 million, representing 26% margin. For full year 2021, Bumble Inc.'s revenue was up 32% to $766 million and adjusted EBITDA was $207 million, with adjusted EBITDA margins growing to 27% from 26% in 2020. We continue to demonstrate that we have operating leverage in our business, while simultaneously investing in key areas of product, technology and marketing. Our net income for 2021 was $28 7 million, compared to a net loss of $143 million in 2020. This includes a one-time $442 million tax benefit in Q1 related to the release of a net deferred tax liability that resulted from a restructuring of our international operations that we completed in connection with the IPO. As of year-end, cash and cash equivalents totaled $369 million, up from $128 million last year. We generated free cash flow of $91 million in 2021, more than double the $41 million we reported in 2020. Now moving on to our financial outlook for 2022, as we look ahead, we are very excited by the overall growth runway that is ahead of us. For full year 2022, prior to the current conflict in Russia and Ukraine, we expected revenue to be in the range of $954 million to $964 million, which represented 25% year-over-year growth at the midpoint. As you heard earlier from Whitney, we have decided to remove all our apps from the Apple and Google app stores in Russia and Belarus. We estimate that this represents a loss of about $20 million of revenue for the year, predominantly impacting Badoo revenue. Revenue directly from these countries accounted for less than 0.1% of Bumble App revenue in 2021. And hence, we do not anticipate any impact on Bumble App's 2022 outlook. As a result of this decision, our revised revenue outlook for 2022 is now $934 million to $944 million, which is a year-over-year growth rate of 23% at the midpoint or 26% when compared to full year 2020 revenue, excluding Russia, Ukraine and Belarus. This also includes approximately $20 million of estimated FX headwinds year-over-year due to the appreciation of the US dollar against many global currencies. We expect Bumble app to have another strong year, growing between 34% and 36%. We are excited about the current trajectory of international expansion and the product innovation that will be the driver of our growth. We expect Badoo and other revenue, which will include Fruitz going forward to be down year-over-year primarily driven by the current conflict and ongoing impact from COVID. Our outlook assumes no revenue from Bumble BFF in 2022. We continue to take a similar approach with BFF that we took with Bumble Date, prioritizing the user experience first before turning to monetization. We will test multiple monetization strategies this year, including advertising and sponsorship but have not assumed any contribution from those in our current outlook. Now, on to full year margin. Excluding the impact of Russia and Ukraine, we expect our full year adjusted EBITDA margin to expand by 100 basis points in 2022 that is up from the 27% we delivered for full year 2021. This outlook includes the savings from reduction of Google's subscription fees from 30% to 15%. Now including the flow-through impact of the loss of $20 million revenue from the conflict, and also including modest dilution from Fruitz as we invest in its integration and growth, we now expect that our EBITDA margin for 2022 will be in the range of 26.5% to 27%. We may also need to incur additional costs associated with discontinuing our Moscow operations given the rapidly changing nature of the situation, we are still assessing the scope of it. Our EBITDA outlook also assumes current App Store policies and does not include the impact of additional fees we could pay Google to the mandate Google Pay billing starting in April 2022. If that were to happen, we would see additional costs of approximately $16 million for the rest of the year. We continue to track developments for both Apple and Google app store fees closely. As such, we have not factored any additional savings into our outlook from any further changes that may impact this favorably, but we believe that we are well positioned to capitalize on any upside opportunities that may come our way. Now, moving on to Q1 outlook. For Q1, we expect total group revenue to be in the range of $207 million to $210 million, which represents a growth rate of 22% at the midpoint. Our outlook estimates approximately $5 million of year-over-year FX headwinds. Our outlook also includes approximately $2 million of negative revenue impact from the current Ukraine-Russia situation. Again, this impact is expected to be mostly in Badoo with immaterial impact to Bumble app. We expect Bumble app revenue to be in the range of $152 million to $153 million, which represents 35% year-over-year growth at the midpoint. For Q1 adjusted EBITDA, we expect to be in the range of $47 million to $49 million, which is an adjusted EBITDA margin of 23% at the midpoint. In conclusion, we are very proud of our first year as a public company and are increasingly excited about the significant opportunity that is ahead of us. With that, I wanted to say thank you. And now we can turn to Q&A.

Thank you [Operator Instructions] Our first question comes from Shweta Khajuria of Evercore ISI. Your line is open.

Okay. Thank you. Let me try two, please. Could you please expand on your full year outlook. Specifically, how should we think about the tailwinds that you may be expecting from Omicron’s impact as we go through the year, you could frame that? And any commentary on if you expect net adds in the full year Bumble net adds to be greater than in fiscal year 2021? And what's going to be the driver for this growth for Bumble App? That's question one. And then question two, thanks for the color on Russia and Ukraine impact. Possible to get your thoughts on potential impact in rest of Europe, some of your major countries, if you're seeing any distraction just from the war and if that is baked into the guidance? Thanks a lot.

Yes, sure. Shweta, I'm happy to. So, as I mentioned, if you look at the guidance for the full year, we are expecting revenue of $934 million to $944 million. And that, as we said, includes the negative impact of $20 million that is related to Ukraine and Russia. So if you break it down by app. So for Bumble apps, we are guiding to a revenue growth rate of 34% to 36% year-over-year. And we expect that, that growth will be very strongly supported by growth in paying users all through the year, alongside stable ARPPU performance. And we expect that the growth in paying users really comes from two areas. One, our international expansion plans are expected to be a huge driver of this, both in the markets that we launched last year such as Western Europe but also in newer markets that we are intending to launch in the second half of this year in regions such as LatAm. So we're very excited about that. We are also excited about the product road map that we have in 2022 that we believe will be a big driver for increase in payer penetration and as a result, improvements in paying users for Bumble App. For Badoo app, like I mentioned, this is going to include Fruitz going forward. We are guiding to be slightly down on a full year basis as a result of both impact from COVID as well as FX headwinds and as well as removing revenue from Ukraine and Russia. So as a result, we are expecting that we will see near-term negative impact on both paying users and ARPPU as a result of this. And our goal on Badoo is to continue to maintain the focus on engagement, so we can continue to provide our users with the best experience possible so that when they come out of COVID, they are in the best possible -- they have the best possible experience and then they can continue to become a paying user. Now your question on outlook. We haven't currently in the guidance assumed any major changes in terms of user behavior from what we are seeing today. But as you said, we know there is pent-up demand amongst our users, but we are not yet assuming any huge changes to how people are going to be socializing and how people are going to be mingling with other people come spring and summer. So if that has to happen, we certainly think that there would be upside to our Bumble App as well. And I'll turn it over to Tariq to talk about some trends from Omicron.

Yes. In terms of the other countries, as it relates to the conflict as well as Omicron, what we are seeing, of course, the majority of the impact is on Badoo. As Anu said, we're not seeing any impact on Bumble app resulting from the conflict so far. What you see is the decrease in activity in Ukraine and of course, the actions we're taking now in Russia, you see a very modest level of distraction is probably the best way to describe it in countries immediately bordering Ukraine. That is something that we see in terms of slightly decreased engagement metrics and things like that. At the moment, situation is very fluid. We don't expect to see any evidence that these will be long-lived trends. But of course, it's a challenging time and people have been a little distracted over the last couple of weeks.

Okay. Thanks, Anu. Thank you, Tariq.

Thanks, Shweta.

Thank you. Our next question comes from Alexandra Steiger of Goldman Sachs. Your line is open.

Thank you so much for taking my questions. Two, if I can. So just as a follow-up on Bumble paying user growth. How should we think about cadence of net adds as we go through the year? And then maybe in that context, could you maybe elaborate on your Bumble app, international expansion priorities from here? And then second, I just wanted to touch on like the Fruitz acquisition. And if you can just elaborate a little bit on the rationale behind that acquisition and also your appetite for additional M&A going forward. Thank you so much.

Sure. Why don't I take the paying user growth, and then I'll turn it over to Whitney to talk about Fruitz and M&A. So if you think about Q4, we had excellent paying user growth in a quarter that is usually a seasonally low quarter for us. And if you think about growth in paying users, for us, it's largely a function of two areas, right? One is growth in overall users since we are obviously a premium app, and that means that as we continue to grow our user base, we will continue to grow paying users as well. And the second one is improvements in payer penetration that are both assumptions of big product enhancements that we do as well as constant under-the-hood optimization that we are going to be doing all through the year. So as we think about the cadence to paying users, you have to sort of take that into account. So you'll see us do constant improvements every quarter, and then you will have some step change functions in terms of product launches that we have during the course of the year. And then as you think about just overall improving international payers, like I mentioned, we are very excited about continuing to penetrate in Western Europe. We are also very excited about certain markets in LatAm that we think will be big markets for us starting in the second half of the year.

Hi there. So this is Whitney and I will jump in on the Fruitz rationale and plans more broadly with M&A. So I want to start by saying that we are very financially rigorous and strategic about M&A and how we think about that. As it pertains to Fruitz directly, before I go into the broader strategy, which candidly has not changed from the last time we've spoken. To reiterate, Fruitz is one of the fastest-growing dating app in Europe, and as I said in our prepared remarks, it's very focused on Gen Z. And so this popular app really aligns with our mission of creating healthy and equitable relationships. But beyond how we plan to tie this into Bumble Inc. wider plans is over the last year, as you've seen from our prepared remarks, we've seen very strong growth in France, Benelux and German-speaking countries in Western Europe. And so this acquisition of Fruitz is really part of our continued investment in that region. And Fruitz gives us a stronger foothold in Western Europe and Canada as well, but also serves as great potential for expansion more globally with a great team that is eager and ready to scale with our platform capabilities and resources. And the great thing about Fruitz is it does not compete with either of our other leading brands or apps, Bumble and Badoo. This acquisition really just expands our product offerings for consumers, which are very in line with our focus on empowering relationships with Gen Z. And we're very excited about this priority of integrating Fruitz and their team into our broader ecosystem and our culture, and we really enjoyed getting to know them and working with them and exploring all of these growth opportunities. As we talk about M&A more generally, I want to be clear that we have not departed from that original commitment to being this branded house. We have a North Star. Our mission remains very oriented around driving a world around healthy and equitable relationship but all relationships, all being the key word. We want to reach as many people as we can. And because we have this really unique shared resource as a group, which allows us to build these trusted and safe technology features, we're progressive on the stance that we can find opportunities with new audiences through M&A. And so, when we really do the analytical process and we take this financial rigor around both Fruitz and anything in the future, it's all about checking the boxes of fast-growing companies with strong brands. Are they at a stage where it can be leveraged in all of the ways I mentioned earlier and is it complementary to the markets that we serve today or want to reach in the future. So, the final point is they're founder-led, they're mission-driven and we're really, really excited for 2022.

Very helpful. Thank you.

Thank you. Our next question comes from Cory Carpenter of JPMorgan. Your line is open.

Thanks for the questions. First on Russia, just hoping you could talk a bit about what the wind down of operations in Russia could look like practically speaking. And in the meantime, how should we think about any operational risks, if any, related to the Russian operations? And then on Bumble App, Whitney, I think you said Bumble App gained share since 2022 from seven to three globally. Just curious any comments or anything you're seeing around share trends in some of your more mature markets like the US and Europe. Thank you.

Hey, Cory, thanks for the question. Let me start by talking about Russia, and I'll turn it over to Whitney to talk about the share trends. So as we noted, we are -- we have, over the last couple of years since really since 2020 been really diversifying our operations. We have stood up a -- for us very major engineering center in Barcelona. We have strengthened our engineering center in the UK, and we've added technical resources in the US as well. And so this has all been part of a strategy of really making sure we were operating very resilient and robust business globally. What that means practically speaking, is that, as we noted, the skill sets of the team in Russia, while valuable are skill sets that we have in other places in the company. So that's the most important piece to start with. We are very sensitive to and prioritizing the well-being and safety of our team in Russia. And of course, this is something we take very seriously. So we will be working very methodically with them over the next couple of weeks to ensure that we are transitioning the critical knowledge that we have inside of that team. In some cases, how do we maintain connection with some of our team members who may want to not stay in the countries that they're currently in and then how do we build up our capabilities in other countries. So, the reality is, of course, there's a lot of work to do over the next several weeks as we go through the next steps, but we feel pretty good that our -- that the actions we've been taking over the last couple of years have put us in a pretty good place on this, more to come as the conflict evolves, but again, we feel very fortunate to be in this position. Whitney, maybe we'll turn it over to you.

Cory. So a quick update on where we are with market share. So just to reiterate, Bumble continues to grow in our core markets and expand rapidly in international markets as well. And throughout all of that, monetize at a high rate. So, just to reiterate on being the number three most downloaded dating app in the world. That's up from number seven at the start of the pandemic in 2020. So in the US, over the last 12 months, according to third-party data sources, Bumble App download share has increased meaningfully compared to the number one player in the market and we have also maintained our lead versus the third player in the market. And it's worth noting that, that number three player is also taking share from the number one player, not from us. People -- we've said this before, people have two data apps on their phone, typically. And while the second app is changing from one of our competitors to another, we are continuing to see Bumble's position grow. So why and a couple of factors contributing to this, just to keep it short, our brand moat and our women-first orientation are a key source of strength. So according to Morning Consult, the market research firm, across the dating app that they track, Bumble has the highest net favorability score among those aware at each brand with women and Gen Z. So this is a key foundation of our continued expansion and that playbook that is leading the success for us around the world. So that brand-led organic approach to building the business is incredibly critical. And there's no shortcut, right, which is a great competitive advantage for us. A lot of players, even large players, they try to buy market share. And you'll see supply, you'll see some virality for a short period of time caused, primarily by marketing spend, but you do not see users sticking around and using the product long term. And our approach has always been to ensure that we're building that organic flywheel and then adding to it with performance marketing spend, not the other way around.

[Operator Instructions] Our next question comes from Andrew Marok of Raymond James. Your line is open.

Thanks for taking my questions. A couple for new on the Badoo segment. So I guess, could you go into a little depth on the moving pieces of Badoo ARPPU growth in 4Q, things like tailwinds from two-tiered pricing versus FX impacts versus anything else that was going on there? And then also in the Badoo and Other segments, can you help us wrap our heads around a little bit the impacts of the addition of Fruitz and the subtraction of Russia and Ukraine on things like paying users in ARPPU? Thank you.

Sure. And happy to take that. So if you think about Q4 ARPPU, for Badoo was heavily impacted by the FX headwinds that we saw. So if you ignore the impact of that and then you ignore the impact of these changes from a country mix perspective, the underlying ARPPU growth was still there. Now as it relates to two-tier, we are obviously, we've rolled it across many countries. We are starting to see, in some markets where adoption has been good, and we are also starting to see underlying improvement in core ARPPU, I think we have realized that we still have a little bit more work to do in terms of pricing optimization in a lot of these markets to both optimize for higher adoption of two-tier as well as to improve the underlying ARPPU for each of those markets. So that is work that is ongoing as we think about Q1 and the rest of the year as well. Obviously, the headwinds from COVID and FX are sort of muddying the picture, if you will, for what ARPPU look like for Badoo on a clean one-to-one comparison. And as you think about your second question, so we are not going to break out the impact of Fruitz and just what the core underlying Badoo going forward. Like I said, there is a $20 million headwind as it relates to Russia and Ukraine that we assumed in our guidance. The impact to paying users is higher than the impact that we have from a revenue basis. If you think about it, these are lower ARPU market compared to -- lower ARPPU people markets compared to some of other Badoo markets. And so I think we will see a about mid-teens impact on paying users likely as we go through the year, but the revenue impact will be lower as a result of promoting that.

Great. Thank you.

Thank you. Our next question comes from Lauren Schenk of Morgan Stanley. Your line is open.

Great. Thanks. I just want to ask a little bit about App Store fees. I guess what do you make of the fact that we haven't heard anything from Google on the March 31 expiration quite yet. And, sort of, assuming that you didn't put into your guidance, is your assumption that it may not happen. Just any thoughts there? And then is the reduction from the 30% to 15% in year one, is that benefit in the guide already?

I'll take the first part of that, Lauren, and thanks for the question. So we are following this very closely, as you would expect, Google has continued to signal that they are marching towards their deadlines. We are somewhat cautious on this given the experience we saw this summer where the situation changed quite near the deadline as those approach. So we're taking very much a wait-and-see approach. We have both the technical teams ready when we're required to, but we're not going to go any earlier than we're required to on any of the changes that are being put in place. So we're just watching closely and Google will do what they're going to do, and we'll be ready when that happens.

Yeah. And Lauren, to your question, yes, we have built in the savings from the fees for Google subscription going from 30% to 15% in the EBITDA margin outlook that we provided. And just recall that most of Bumble App revenue today, a big chunk of it really goes to Apple. So the benefit that we have from this is lower than what you would normally expect, and that is included in our outlook that we gave.

Great. Thank you.

Thanks, Lauren.

Thank you. Our next question comes from John Blackledge of Cowen. Your line is open.

Great. Thank you. On the expansion into the non-English speaking markets, just curious if you could discuss kind of which markets are doing better and/or worse than expected? And what are the key drivers? And then, just curious also if you can frame the 4Q exit run rate for the Bumble app expansion markets, just to give us a sense of kind of core versus the expanded markets? Thank you.

Sure. Thanks for the question, John. So we are -- as we noted, very, very pleased with what's happening in the non-English-speaking markets. We have been both expanding in Western Europe. We've been expanding in Latin America, India, Southeast Asia. And pretty much across the board, we are really gratified to see what's happening. The organic flywheel that we always want to have turning, which is really based on the brand, the mission, the women's-first orientation of the app is really taking hold in markets that that, frankly, a lot of naysayers said it would never work and that we are really prioritizing. And so that's very much true in Western Europe, but it's also true in Latin America countries like Mexico and Brazil, very much true in Indonesia and the Philippines, as we've talked about, very much true in India. And so we really think this is a broad-based movement at this point. And we are moving country by country being very, very deliberate. On the product side, a lot of what drives us is the localization efforts that we do, making sure that we have the right nuances of the language, right, how we're communicating our key value propositions like women make the first move in in the right way that's locally relevant, culturally relevant and linguistically relevant. But then also, there are some human truths here about equality, about everyone wanting healthy and equitable relationships, and we for us in these new countries to lean into a substantial performance marketing. We want that organic flywheel to start rolling. So on Bumble, I'm sorry, that is very much the story. We're very pleased with pretty much all the countries we've talked about, the regions we've talked about, the performance that we're seeing there. And maybe to your -- to the second part of your question, we haven't -- on the Bumble app, we don't really detect any notable issues from Omicron as that has been rolling out. It's a different situation on Badoo as we noted. But on Bumble, if you look at incidence rates of the disease in Western Europe, for example, you couldn't really see that in the exit velocity or in the run rate that you're seeing in Germany and Switzerland and the Netherlands, et cetera. So we really think that the momentum is continuing to build, users are continuing to monetize at an accelerated rate, and we've seen that continue into Q1.

Thank you.

Thanks.

Thank you. Our next question comes from Brad Erickson of RBC Capital Markets. Your line is open.

Hi. Thanks. A couple for me, first, when you think about consumer budgets, maybe being a little bit more pressured here going forward across the U.S. and Europe, how insulated do you think you are there across your different brands? And then, second, within the guidance, looking for, I guess, roughly stable margins year-over-year. I recognize you've got solid investment there around sales and marketing baked in. But to the degree that you are seeing maybe some positive signal like you've mentioned in some of the international markets, talk about your propensity to maybe invest more and the net effects we might see under that type of a scenario? Thanks.

Sure. So on consumer budgets, again, a pretty different story on Bumble versus Badoo. Bumble tends to have a somewhat more premium audience. What we've seen really throughout the pandemic as budgets have been tight, the economy has been uncertain is that Bumble keeps powering through, and our users are really quite excited to keep engaged with the platform. We've had a premium tier strategy historically. That tier continues to perform well for us with 75% of payers opting for that premium tier, and we do think that, that will continue. So on the Bumble app side, we feel pretty good about the resilience of the user base from what we're seeing. If you look at the Badoo side, as we've noted, the user is generally a more economically sensitive user. And it's a user who does respond to both the COVID dynamics, but the really underlying economic dynamics that, that that COVID presents. In many cases, as we've noted before, they're frontline workers, they work in hospitality, restaurants, retail areas, like that. And so, we do think that there is more sensitivity to tightening consumer budget environments. We are certainly seeing that with the -- with Omicron and particularly towards the second half of December and into Q1 that Badoo has been more challenged than we would have liked. Again, Bumble continues to move forward quite nicely. But you do see the impact in Badoo. And we're keeping a close eye on that, both from a user engagement standpoint and as we think about the monetization strategy, making sure we lean into some of these lower-priced offerings like consumables and the like. In terms of the marketing question, we really pride ourselves on having a very, very disciplined marketing approach. We are very -- this business is driven by peer-to-peer recommendations, as we call it. This is -- someone is successful on one of our apps, they tell their friends. Someone goes to a wedding of a couple that met on Bumble. They tell their friends or their nieces or their nephews or whatever it is. And that forms really the foundation of this organic model that we have, as it relates to that incremental marketing spend, we are constantly on both Bumble and Badoo, looking globally at where there are opportunities, what are the ROIs that we're seeing. We're very fortunate the payback periods tend to be quite short on both Bumble and Badoo. And so it gives us the ability to lean in where we see opportunities. We have -- the -- we have examples of us doing that, for example, in Western Europe, when we've seen successes in Germany, we've leaned into those successes from a marketing standpoint, but they generally pay back quite quickly and aren't margin dilutive.

Got it. Its great. Thank you.

Thank you.

Thank you. Our next question comes from Brent Thill of Jefferies. Your line is open.

Good afternoon. I know you mentioned that there was no assumption of changing behavior in your guidance throughout the year. But I'm just curious in Q1, so far, we're obviously well into the quarter. What you're seeing from the user behavior through this quarter. If you could just give us a sense on what's happening there? Thank you.

Sure. Maybe I'll take a step back and just talk about COVID behavior in general. Again, I'll talk about Badoo and Bumble in just a second. But what we generally find with COVID, and we noted this in past calls as well is that there's what the regulations say, for lack of a better way of saying it, meaning, are there lockdowns or stores opened or restaurants opened. That's, of course, the first bar that a consumer looks at. And then there's the second piece, which is, do you feel comfortable going out? Do you feel comfortable meeting strangers? Do you feel like putting yourself out there? What we've seen throughout the pandemic with both Bumble and Badoo is for those users who've decided, you know what, I'm in, I really want to start and I really want to meet people, our engagement is really at extraordinarily high levels, right? We are really fortunate to see more and more people – more and more engagement from those people on our apps. What we do know, however, is that, there are people who are sitting on the sidelines waiting until they feel comfortable putting themselves out there. They feel like it is both safe and there's not going to be a head shake and somebody says, oh, just kidding two weeks later, you have to come back. And it's a very emotional and psychological decision. And therefore, you don't see the quick action reaction that you would expect when the government lifts lockdown orders or when case loads go down below a certain level. It's not like a switch gets flipped. And so what we see on Badoo is that, there's a lot of hesitance in the Badoo user. And we do see that has increased during Omicron. If you look at the case rates in Western Europe, for example, they're still quite high. We don't really see that abating in the first half of Q2 – or Q1, I'm sorry. And we think, it will take more time for that to work its way through the system. I think in Bumble, we haven't seen any negative impact on the user base, and we hear the pent-up demand when we speak to our users. But as Anu mentioned, we're not yet confident that we're seeing any signals that are going to be long-lived signals of this kind of pent-up demand being released. We remain hopeful of that in the future, but we've all gotten the timing wrong on this a number of times, and we're not prepared to say when we think that will happen at this point.

Helpful color. Thank you.

Thank you. Our next question comes from Dan Salmon from BMO Capital Markets. Your line is open.

Okay. Great. Good afternoon, everyone. Whitney, I wanted to ask briefly for an update of what you previously called, I think, a megawatt advertising opportunity. Anu mentioned some tests this year, and we've anecdotally noticed a little bit more, too. So – maybe could you give us an update on how important you think advertising could become over the next few years for the company? And then maybe just one follow-up. You talked a lot about, obviously, Fruitz and your views on M&A to grow your reach and grow your portfolio. Curious, what your latest views are on interest in maybe creating new apps organically to grow your reach as well? Thanks.

Hi, there. Thanks for the question. It was a tiny bit hard to hear you. So I hope I – I hope got your questions properly, if I didn't, please correct me. So, on the first piece, when you talk about advertising, we are very proud and excited about the runway for further penetration of monetization. More generally, what we have said as it pertains to overall revenue at the business right now, we said in our prepared remarks, only 10% of the bumble app customers are payers. There's huge runway for that to be penetrated [Technical Difficulty]

Hey, Val [ph], we can take one more question.

Thank you. Our next question comes from Deepak Mathivanan of Wolfe Research. Your line is open.

Hey, guys. Thanks for taking the question. Just a couple of quick ones. So first -- can you guys hear me?

Go on, Deepak.

Can you hear me okay?

Yes. Sir, your line is open.

Okay. Perfect. Yes. So I just wanted to ask a couple of quick ones. First on BFF, it sounds like there isn't a lot factored into the guidance on revenues. But can you elaborate on the time line of when we should start seeing monetization…

Dial-in back. Hi. This is operator, can you hear me?

Yes.

Okay. Deepak, you may ask the question. Wolfe Research. Go ahead.

Should I continue the question?

Go ahead.

Okay. Okay. I'll try again. Just a couple of quick ones. First on BFF. It sounds like there isn't a lot factored into the revenue guidance, but I was just curious if you can elaborate on the time line of when we should start to see some of the monetization efforts start scaling over the next few quarters? And then the second quick one…

Please continue on the second one.

Okay. Yes. I'll keep this one short too. I just wanted to make sure what you are referring to the ARPPU for Bumble for 2022. Are you expecting it to be flat from current levels? Just wanted to make sure we're understanding it.

Thanks for the question. And we don't know what happened. We got cut off for the last question. So we apologize to everyone listening. But we are back. So as far as BFF monetization, we are fully focused on building out the continuum of product feature offerings and investing in our -- in the expansion of our customer base that is engaging with the product. 2022 should not be focused around the BFF monetization. That does not negate the strong conviction we have in the long-term monetization growth horizon for this product and for this offering. But it should not be the focus for 2022. And just like we did with dating on Bumble, we focus on engagement. We focus on ecosystem health. We focus on the innovation of the product offering and building up engagement and peer-to-peer recommendations and then we turn to monetization focus.

Yes. And just quickly on ARPPU. So right now, we are not forecasting huge increases on ARPPU in our outlook. We certainly have in our product road map several product offerings that we want to build towards continuing to increase our people, both on the subscription side as well as on the consumables side. These are constantly being tested and will be rolled out through the course of the year. We haven't built any upside from that into our model. Examples of things that we are thinking about are building subscription bundles that make sense for different cohorts of people that have high monetization, high payer penetration potential. So, I'll just say more to come on that. For now, our focus is on driving high levels of payer penetration, but we have a lot of things in the pipeline to drive improvements in ARPPU as well, which we see as upside to our outlook.

Okay. Thank you very much.

We may take one last question, please.

Thank you. Our last question will come from Steve Koenig of SMBC. Your line is open.

…on for Steve. Thanks for taking our question. I'm wondering if you can give a general update on the beyond dating strategy. Where you at with BFF product liability, how is engagement playing out compared to your expectations? Thank you.

Thank you so much. So we're very excited about the improvements that we've made to the current BFF, friend-finding product initiatives. So as we've said in previous earnings calls, the product had not been innovated since 2016 since we’ve rolled it out and so the fact that we've had as many customers using and engaging with this product as they have in such a early product offering really just suggests that strong unlock opportunity and runway ahead of us. So, as of Q4 -- as far as Q4 goes, we really financed some of the discovery flow mechanisms, and we really work on anchoring the products around interest and passion. And as we said in our prepared remarks, these initial changes really accelerated BFF in terms of the active user base with now around 15% of the Bumble users engaging with the BFF, which is up from around 10% a year ago. And so that increasing engagement really continues to drive stickiness and that LTV. And also what it does, which is really interesting is that de-stigmatizes the category. So you bring people on to the product. It's a nice on-ramp back into dating as well. You bring people on to the product that otherwise were adverse to trying a dating app, and so this rate -- this rate mechanism and on ramp. So as for the future and where we're going next, we are innovating very quickly on this product. We have been very, very focused on getting product right. As we said, we're very excited about what we're seeing so far in the test cases around engagement, around stickiness, around all sorts of engagement and markers that would suggest that this has the potential that we believe it does. And as we look to the rest of 2022, it's really about finalizing our tests, getting these features, rolled out into as many hands as possible and then providing more robust updates as the earnings come.

Perfect. Thank you.

Thank you.

Thank you. Ladies and gentlemen, this does conclude today's conference. Thank you all for participating. You may all disconnect. Have a great day.