Bumble Inc. (BMBL) Q1 2022 Earnings Report, Transcript and Summary

Good day, ladies and gentlemen, and thank you for standing by. Welcome to the Bumble Incorporated First Quarter 2022 Earnings 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] At this time, I would like to turn the conference over to Ms. Cherryl Valenzuela. Ma'am, you may begin.

Thank you for joining us to discuss Bumble's first quarter 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 statement 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, 2021, and our subsequent periodic filings. During the call, we also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release, which is available on the Investor Relations section of our website at ir.bumble.com. And with that, I'll turn it over to Whitney.

Thanks, Cherryl. Good afternoon and thank you all for taking the time to join our call today. We had an excellent first quarter, achieving total group revenue of $211 million, driven by continued strength in Bumble App. Our total paying users exceeded 3 million with Bumble App adding 134,000 paying users sequentially. We also delivered profitable revenue growth, with adjusted EBITDA of $50 million. I'm proud of these strong financial results, which are a testament to our team's execution against our long-term strategy. The world has seen heightened macroeconomic concerns this quarter, including the conflict in Ukraine and inflation. Many areas of the global market continue to struggle with COVID. I'm very grateful to our team for navigating through these challenges, including the difficult decision we made to discontinue our Russia operations. As we have seen throughout the pandemic, the need for love and connection endures through both positive and challenging times. And we are laser focused on always being there to support our users. The countless success stories we hear around relationships, marriages and birth is the inspiration that drives us every day, and we are excited about the opportunity this represents. Let's start with Bumble App. Q1 revenue grew 38% year-over-year to $155 million, fueled by growth in both paying users and ARPPU. We saw strong revenue performance in both our traditional markets as well as in our international growth markets. The US remains a very important region for us. In Q1, based on third-party data, we expanded our download share and strengthened our number two position in the market. We still have substantial opportunity to grow in the US and our continued pace of our user engagement is a sign of the runway we believe we have as markets continue to reopen and COVID becomes endemic. Within our international growth markets, we are proud of our continued progress across Western Europe, Southeast Asia, India and Latin America. In Q1, Bumble App became the second most download dating app in Germany and revenue across the broader dock region almost doubled year-over-year. Our on-the-ground field marketing-oriented approach grounded in our mission, generates authentic word-of-mouth and continues to resonate internationally. We are seeing this success start to be replicated in our newer markets, such as France, the Netherlands and Mexico as well. This broad-based geographic growth underscores the strength of our business that is focused on engineering women-first experiences and providing our users a safe, trusted and accountable environment. Over the years, Bumble App has built a remarkable community of users. Core strong advocates for the brand and who actively share their positive experiences on the app with their friends and their social connections. Bumble App top of funnel remains healthy, and we continue to add a majority of our new users organically. Additionally, throughout the pandemic, we have seen reengagement drive monthly active user growth on a consistent basis. This is when users who had gone dormant on Bumble for a variety of reasons, including those that took a break from dating due to COVID return to our app. The strong brand loyalty we have brings them back when they're ready to resume dating and extends our lifetime value. We have a robust product development agenda for Bumble App this year and are in the process of rolling out a range of innovations globally. I want to spend just a few minutes walking you through some highlights. Fundamentally, people join Bumble to find someone they connect with in a trusted and safe way. We are launching a range of discovery-oriented features to make our platform more powerful for both women and men. Earlier this week, we rolled out our new complement feature in select markets as a first step in our global rollout. With complements, people are able to send short pre-match messages to potential connections to show a little more of their personality and build more of a personal connection. We've also recently launched in these markets pre-match audio profile elements and a new and improved experience for our non-binary users. Another theme we are focusing on is hybrid experiences. As the world continues to reopen, we want Bumble App to become a go-to companion for this online and offline hybrid world. Our product and marketing initiatives are focused on combining the power of Bumble App with the excitement of meeting in real life. We recently launched our BT event access system, which provides QR codes inside of our app to give you access to unique real-world experiences. We are building on this with a major initiative called Bumble IRL, which we launched last month in partnership with leading brands such as SoulCycle, Topgolf and the James Beard Foundation. We are offering our users across the U.S. access to a year-long slate of in-person events ranging some food and beverage tastings that women owned restaurants to live music, sports and volunteer events. All of these are designed to help our users find and easily connect with other singles who have shared interest. Additionally, we are expanding our pioneering honey campus ambassador program, which now has nearly 600 ambassadors across colleges in the U.S. We will be rolling out new product integrations just in time for the summer break and the new school year, helping college students stay connected when they leave campus and then reconnect when they return. Bumble start it on college campuses, and we are big believers in the power of these campus community. These are just few examples of what we can do when we combined our unique brand with a distinctive product experience. Our approach to monetization builds on these efforts by providing value-added experiences that users are willing to pay for. For example, in Q1, we launched a series of enhancements to Beeline, a popular feature in our higher price Bumble Premium subscription tier. The enhanced Beeline offers better ways to manage inbound activity such as enabling users to sort by the closest connections or the most recent likes. The redesign drove significant improvement in payers and will lay the foundation for further product enhancements and optimization. As you will recall, 2021 was focused on driving adoption of our premium subscription tier, while 2022 will be focused on driving further payer growth by expanding lower price entry points through both subscriptions and consumables. We began testing virtual goods this quarter in several markets in the US. In these markets, users now have the option to upgrade their super swipe, which lets their connections know that they like them with a gift such as virtual flowers. In our initial test, we have seen strong engagement in virtual goods from our Gen Z users. This is exciting as it creates a more fun and dynamic experience while being the basis of our future in-app consumable economy. We expect that virtual goods will launch later this year, part of a strong monetization road map we had planned for the second half of 2022. We continue to make strong progress with our front finding service Bumble BFF. Our north star with the enhanced Bumblebee BFF offering is to provide high frequency, low stake ways for people to discover and get to know each other around shared joys and common struggles. The results so far of our ongoing alpha taps have been very positive. We have found that with limited promotion over 40% of active BFF users are becoming actively engaged with new experiences we're offering and retention after one month with upwards of 75%. We plan to rollout more features and expand to other user segments in Q2. Now turning to Badoo App and other. Revenue for Q1 was $56 million, a decrease of 4% year-over-year. As we've noted, Badoo has a sizable presence in Central and Eastern Europe. And I want to start with an update on the Ukraine complex. Since our announcement in March, we have removed our apps in Russia and Belarus and also removed paywalls in Ukraine. These decisions, coupled with significant FX headwinds are the reasons for the decline. To do at a high-scale, valued brand across the world and remains a top three lifestyle app in dozens of countries, we're helping people everywhere find love. Millions of people connect and build relationships every year on Badoo. For example, just this March, we partnered with two of our users, Christina and Antonio, to help them celebrate their wedding. Our campaign featuring them went viral across Spain and Latin America, driving an increase in organic registrations. Building on successes like this, we believe Badoo has room to grow as we navigate the current situation in Eastern Europe and as the COVID situation improves. We are actively adjusting our marketing approach to reflect the macro environment, and we scaled back on Badoo brand marketing substantially in late Q1 as we assess the complex impact on our user base more broadly. As the situation stabilizes, we will be opportunistically looking to expand our marketing activities again, while continuing our strict discipline around ROI and short payback periods. From a product standpoint, in Q1, we focus on ongoing optimization of our user experience within Badoo. We've been experimenting with new ways to boost engagement and user acquisition, including rolling out short-form video capabilities on user profiles and streamlining our in-app coin economy. We expect to lean into these areas throughout 2022 to provide more reasons for people to use Badoo when the pandemic recedes and users reenter the dating theme. Bumble Inc. has always been a leader in ensuring trust and safety and online dating. In Q1, we achieved some important milestones. We launched an industry-first partnership with Bloom, a remote trauma support service to offer complementary online support globally to users of both Bumble and Badoo, who report sexual assault or relationship with you. We continue to invest in technologies such as machine learning and AI to create spaces that users can trust by filtering out unwanted content and images. In parallel, we continue to advocate for women's digital safety globally, and we are excited to announce that Bumble supported cyber flashing campaigns have made advances in the UK and the US, including a bill that was recently passed into law in Virginia. We are encouraged by the opportunity we see on the horizon. We have navigated successive waves of the pandemic, serving our users who are looking for love and willing to put themselves out there. We know that there are many, who are so cautious about COVID. But we also hear from many, who are looking to go out and meet people more actively. So while there's a fair bit of macro uncertainty clouding our visibility, we are optimistic about the return to a more normal environment. We are creating our own tailwind by focusing on product innovation, international expansion and operational excellence, so that we can continue to deliver strong results. In closing, I'd like to thank our team for their hard work, an unwavering commitment to our mission. I'd also like to thank all of our customers, partners and investors for their continued trust and support. And with that, I'll turn it over to Anu for a more detailed discussion of our financials.

Thank you, and good afternoon, everyone. As Whitney shared, we are off to a great start to the year. We delivered strong results in Q1, exceeding our guidance for both revenue and adjusted EBITDA. I'll begin with a discussion of our first quarter results, before turning to our guidance for Q2 and the full year. Unless stated otherwise, the comparisons I will make refer to the first quarter of 2022 versus the first quarter of 2021. Total revenue in Q1 reached $211 million, up 24%, driven by strength in Bumble app. As we mentioned in our previous call, we have continued to see the dollar strengthening against many currencies, including the British pound and euro, leading to a $5 million FX headwind in the quarter. We also saw approximately $2 million negative impact in Badoo from our decision to discontinue operations in Russia. Combined, these impacted our Q1 year-over-year growth rate negatively by 4 percentage points. At a group level, paying users grew 7% to slightly over $3 million, and our people increased 14% to $22.76, primarily driven by mix shift towards Bumble App. We are pleased that both paying users and our people continue to propel our overall revenue growth. Bumble App continues to perform well, with Q1 revenue growing 38% to $155 million. We saw headwinds due to FX of approximately $2 million, which impacted our year-over-year growth rate negatively by two percentage points. Revenue growth was driven by an increase in paying users, which was $1.8 million, up 31% year-over-year. We added 134,000 paying users sequentially, up meaningfully from the 108,000 be added between Q3 and Q4. A number of factors contributed to the strong growth in paying users, including robust MAU trends, healthy engagement and attention, along with several product enhancements in Q1, such as the redesigned Beeline feature. Bumble apps ARPPU increased 5% to $29.18. ARPPU decreased 5% sequentially, primarily due to mix shift as a result of international expansion and also the negative impact from FX. Now, moving on to Badoo App and other. Starting this quarter, revenue from Fruitz, which we acquired in January of this year will be included in this section. However, due to different reporting definitions, we have opted to exclude Fruitz paying users and our people from Badoo app and other KPIs at this time. We will revisit, adding them once our integration is complete. Badoo App and other revenue in Q1 was $56 million, down 4% year-over-year. We saw headwinds related to FX and the Ukraine conflict of approximately $5 million, which impacted growth rates negatively by eight percentage points. Additionally, Badoo App, by virtue of the geographic and social demographic profile of its user base, continues to be more exposed to macro headwinds, including COVID and inflation. We expect these factors to continue to be a challenge in many of Badoo's core markets in the near-term, adversely impacting users' propensity to pay and overall monetization. Badoo App and other paying users declined 15% to $1.2 million. Our total paying users decreased 106,000 sequentially. We lost approximately 60,000 paying users between Q4 and Q1 in Russia, Ukraine, and Belarus. These three markets had a higher impact on paying users versus revenue due to lower than average ARPU. As a reminder, we only saw one month of paying user impact in Q1, and we expect Q2 to reflect a full quarter decline of approximately 120,000 to 130,000 paying users across these three markets. Badoo app and other ARPU was $13.51, up 6% year-over-year and up 1% from the previous quarter. The increase in ARPU was due to geographic mix shift away from Russia, Ukraine, and Belarus, offset by FX headwinds. Now, turning to expenses. Total GAAP operating expenses were $192 million for the quarter, down 32% year-over-year, primarily due to IPO-related expenses we incurred in Q1 last year. Excluding stock-based comp and other non-cash or one-time items, our total non-GAAP operating expenses were $161 million. Cost of revenue was $56 million and grew 21%. The increase was driven by higher in-app fees as revenues have grown. As a percentage of revenue, cost of revenue was 26% compared to 27% last year due to reduced subscription fees on Android, which has dropped from 30% to 15%. Sales and marketing expenses grew 39% to $58 million, representing 27% of revenue, up from 24% last year due to increased marketing spend and headcount-related expenses. G&A expenses were $32 million or 15% of revenue and product development expenses were $16 million or 8% of revenue compared to 9% last year. Q1 net earnings were $24 million compared to net earnings of $323 million last year, which included a one-time $442 million tax benefit related to restructuring at IPO. Q1 adjusted EBITDA was $50 million, up 8% and representing 24% margin. We ended Q1 with total cash of $309 million. We also generated positive free cash flow of $14 million compared to the negative cash flow of $48 million we reported last year. Now, moving on to our financial outlook for Q2 and full year. Our outlook represents our current expectation for revenue and adjusted EBITDA based on the visibility we have today. We have factored in two key considerations into our outlook: First, the continued appreciation of the US dollar versus other currencies, even relative to the rates that we saw in early March when we first shared our full year outlook. Based on the movement we've seen since our last earnings call, we expect to see incremental headwinds from FX on both Bumble and Badoo. Second, incremental in-app fees we expect to pay as a result of adoption of Google Play billing, which took effect on April 1 and will be fully enforced on June 1. As a result, for Q2, we expect total revenue between $218 million and $221 million, representing a growth rate of 17% to 19%. Our Q2 outlook is impacted by FX headwinds of $9 million, which is $2 million incremental to what we had estimated in March. Our outlook also assumes approximately $6 million of headwinds related to the conflict in Ukraine, primarily in Badoo. Without the impact of FX and the Ukraine conflict, our total revenue growth would have been 25% to 27%. We expect Bumble App revenue between $16 7 million and $169 million, representing a growth rate of 31% to 33%, supported by accelerating net adds. This assumes a negative impact of $5 million from FX, which is $1 million higher than what we had estimated in March. Excluding FX headwinds, our growth rate would be 35% to 36%. We estimate adjusted EBITDA between $51 million and $5 3 million, representing 24% margin at the midpoint of the range. This includes additional fees as a result of adoption of Google Play, which is approximately a two percentage point headwind to our margin. For full year 2022, we are maintaining our revenue outlook of $934 million to $944 million, consistent with the outlook we shared in March, which contemplated approximately $20 million of headwinds related to FX and $20 million related to the conflict in Ukraine. The current FX environment remains highly volatile. And if the current rates continue through the rest of the year, we estimate we will see an additional $8 million of FX headwinds, not anticipated during our prior call, bringing total FX headwinds for the year to $28 million. As a result, if current FX conditions persist, we would expect reported revenue to come in at the lower end of our guidance range. Excluding the impact of FX and the conflict, the revenue growth rate would be 28%. For Bumble App, we expect to be at our previous guide of 34% to 36%, which includes approximately $15 million of FX headwinds, $4 million higher than what we had originally estimated. Excluding FX, our growth rate would be 37% to 39%. With respect to adjusted EBITDA margin, our full year outlook is between 24.5% to 25%. This now includes the previously communicated $16 million of fees as a result of enforcement of Google Play billing, which is approximately a two percentage point negative impact to our margin. Moving forward, we remain very focused on executing on our long-term growth strategy with strong financial discipline. And with that, thank you, and we can open it up for Q&A.

[Operator Instructions] Our first question or comment comes from the line of Cory Carpenter from JPMorgan. Your line is open. Mr. Carpenter, you may need to unmute your phone.

Operator, we can move to the next question.

Next question or comment comes from the line of Alexandra Steiger from Goldman Sachs. Your line is open.

Thank you so much for taking my question. Maybe first of all on Bumble Paying user growth, could you maybe unpack what drove the nice acceleration in Q1? And how different markets have contributed to the nice acceleration here? And then second, on the full year revenue guide, can you maybe share your assumptions on and expectations in terms of like the various macro factors that are impacting the revenue growth guide here? And then also any revenue contributions from the new features that you rolled out and that you're planning to roll out in the next few quarters? Thank you so much.

Sure. Hi, Alexandra. Happy to take that. So, in terms of the Q2 net adds, as we've said before, our goal is always to pay first focus on maximizing revenue. And from a product perspective, we are always aiming to create a set of experiences that a broad range of people will find value in. And in 2021, we focused on our existing payers by creating the 2-tier product for Bumble App. And the focus for 2022 is really on broadening our monetization approach, so we can increase payer penetration across our user base. And we've said this before in our prior earnings call as well. And the way we've done this in Q1 and you'll see us repeat the strategy throughout the course of the year is, by introducing new subscription bundles, new consumables as well as virtual goods. And in addition to these specific launches that we have earmarked for certain times in the year, we're also heavily focused on what we call always on product to capture a free user at the right moment in their user experience and then convert them into a pair. So for example in Q1, we redesigned B line, which, as Whitney talked about, is a popular entry point for us and in addition to the actual redesign, we're also heavily focused on marketing the redesign around two days, like Valentine's Day, etcetera, that drove strong increase in paying users. And then finally, our growth in paying user and net ad also came from growing our overall user base. We are obviously a premium app and so growing our top of the funnel is a key focus area for us. And we've seen strong increases in both our core markets such as the US as well as we've seen strong traction from a lot of our newer international markets like the dark, that again would need referred to in our prepared remarks. And so, as you look at the cadence through the rest of the year and what we built into our outlook is, from a product perspective, a lot of the same themes. As I think about Q2 and Q3, we do expect to accelerate net adds, both in Q2 as well as in Q3 as we land some of the big product initiatives we have. We talked about creating lower-tier bundles. We've talked a lot about potentially having student bundles in relation to the campus impactive program that we are focused on Q3. And then we're also excited about launching some of the new consumables and virtual goods that we are currently testing. So all of those are included in how we think about the road map and revenue guide for the rest of the year.

Okay. Thank you.

Thank you. Our next question or comment comes from the line of Shweta Khajuria from Evercore ISI. Your line is open.

Okay. Thank you. Let me try two, please. One is on the market share shift. Whitney, you addressed this a little bit. Could you please give a little bit more detail on what you saw in terms of the market share gains in the US as well as in Europe? And what really drove the shifts that you were seeing in particular? And then the second question is, any way you could frame the impact of contribution from the perhaps the different pricing tiers, the student pricing tier and virtual goods that you expect to see in the back half of this year? Thank you.

Hi. Thank you for your question. So as we said, we're very happy with our performance, in particular, versus our competition this quarter. As noted, we continue to see very strong brand resonance and performance, including what third-party data sources indicate as the highest Net Promoter Scores in the industry. We saw our download share in the critical US market expand in Q1. And the download between us and the number three player in the market widened. We have seen this momentum continue into April. We're also very excited by the active product launch cycle that we have planned for late Q2 and the second half of the year kind of as what Anu just said. And we believe that we'll continue to reinforce our women's first positioning and competitive differentiation.

And then Shweta, this is Tariq. To your second question, we are seeing a lot of momentum from the existing products that we have in the market. As Anu mentioned, we are seeing increases in both ARPU and payer penetration coming from those products. And then the tests that we are doing on things like virtual goods, some of the consumable offerings and some of the -- the lower bundles -- lower tier bundles are all showing quite nice results in the testing. So we're not going to break out the specific contribution, but we're kind of equally excited about both elements, the existing traction of the current products as well as some of the new product launches we've got, Tim.

Okay. Thanks, Whitney, thanks Tariq.

Thank you/

Thank you. Our next question or comment -- we'll try again Mr. Cory Carpenter from JPMorgan. Your line is open.

Okay. Sorry about that. Can you all hear me now?

Yes.

Okay, good. I'll ask about the App Store. Just could you talk about the transition in Google Pay payments you made a quarter? Did that have any impact on your operations? We know the financial impact, but just curious, did that did you see any incremental friction in the sign-ups and then also kind of around the one-day subscription offering that you had? Thank you.

Hey, Cory, Sure. So just to remind everyone, the Google Pay billing mandate went into effect on April 1, and they provided some grace period with some conditions with some strings attached for about two months. And during that time, if you're not compliant, you -- they're not going to remove you from the store, but you just can't update the app. So there was a little bit of wiggle. And what we ended up doing, as you recall, we did a lot of testing on this in Q3 of 2021, learned a lot. And so that informed a lot of what we are doing now. On Bumble App, we are 100% compliant globally. We are seeing revenue continue to perform well. The payer mix shift that we anticipated is happening. We have an increase in seven-day subscriptions, a reduction in one-day subscriptions, but we are expecting, even in light of all of this, robust paying user growth in Q2 and in Q3, as Anu just mentioned. So I think on Bumble, we're feeling very good about the changes. They are live in every market that we operate in and no real surprises from what we learned in the test. On Badoo, we – as a result of the test, we – in Q3, we did a number of – we developed a number of mitigations. We are not compliant in all of our markets, yet on, Badoo we are taking a slow ramp-up approach to make sure that these complaints are in fact having the impact that we expect to have. So far, we are very encouraged by the rollout that we have underway. Mitigations include introductory offers for higher tier. Subscription offerings, they include the one day consumable offering that we've talked about in the past. They thought they include some changes to the payer flow that we have. And I would say, in general, we are happy with the results that we're seeing there, and we think that we will be able to mitigate the issues that we saw in Q3 of last year. There's a couple of areas. I wouldn't call them exactly friction points, but just a couple of areas we're continuing to work pretty closely with Google on as an example, and these are all micro areas. But if you look at Argentina, Argentina is a reasonable market for Badoo. We have a number of paying users in Argentina. Google Play Billing did not support transactions in Argentine pesos. And so they will require people when we switch over to paying euros, and we are concerned that, that is not a great experience for users. And so we are, like I say, working with Google to figure out what can be done to make sure that our Argentine users are treated accordingly. But I'd say, these are all on the margin as opposed to core to the Badoo business.

Great. very helpful. Thank you.

Thank you.

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

Great. Good afternoon, everyone. I'm going to slide in 2 questions. First, just to follow-up on the international expansion for Bumble, obviously, a lot of focus on Western Europe right now, could you just spend a little bit more time on emerging markets? I know there's a handful of they're starting to get up and running, but how you see trends and then, obviously, the expansion moving to those markets more over time and when that may become the thrust of your international expansion? And then I think this is the third call in a row, I've asked for a follow-up on your advertising plans with me. I know you talked about being able to do that in BFF would love to hear about your latest thoughts on what the potential is there? Thank you.

Hey, Dan. Sure. I'll start with the international expansion and then turn it over to Whitney on the advertising side. So on Bumble, we are, as we mentioned, very happy with the reception that we've seen in Western Europe, which you're alluding to. But we also have highlighted in the past and continue to be very excited about our traction in India, which is for us growing at a very rapid clip, continuing to grow at a very rapid clip. Southeast Asia, so Indonesia and the Philippines, as we've mentioned before, these are all markets that we've seen traction in 2021, continuing into 2022. I'd say, the big push this year is to continue that traction in South and Southeast Asia, while really pushing into Latin America. Mexico has been a market that we – we made some entry points into in 2020, I think it was. And then because of the COVID situation, we actually paused. We have gone back into Mexico, back into Brazil in a fairly significant way, are seeing very good traction there in terms of both user growth and revenue growth. And we are continuing a, what I'd call, a systematic rollout in Latin America. We launched Chile as an example, a couple of weeks ago, maybe a month or two ago now, and we're continuing to go market by market there. So we're very encouraged by that. I think, what I would say looking forward is, you should expect to see us continue to systematically increase penetration in Latin America. You should expect to see actually a lot of continuing in Western Europe, there's entire countries like in Southern Europe, Spain, Italy, et cetera, as well as the Nordics that we have not done very hardened to date. You should expect to see that. And then I think as we get closer to 2023, looking at how we redouble our efforts in Asia starting with Southeast Asia and then moving north is probably what I'd anticipate.

Okay. Great. So I'll give you an overview on the advertising question. But before we do that, I just want to give you a quick update on BFF. So we continue to make great progress on our photonic friend finding service. We continue to see strong levels of engagement on the core product, following on the US changes that we made late last year and our alpha test of new functionality continue to go very well. Users are responding incredibly positively to the changes that we are introducing, and we're seeing a high level of engagement with our major new features and critically over 75% retention after the first month. So this is a great sign of the traction we're hoping to achieve. Actually, a quick note. Yesterday, we significantly expanded the alpha test to include almost 5 x more users. And assuming that, that continues to go well, we'll be looking to roll out to new markets, starting this summer. So just as a final point on BFF before we talk about advertising, we're planning a broader consumer-facing announcement in Q3. So, everyone, please stay tuned for more details there. As it pertains to advertising, as we've always said in the past, there are major revenue opportunities ahead for BFF, but they should not be expected in the immediate future. That was never part of the 2022 road map. We are very focused on the product, building the ecosystem, the communities and really going into this new group format and testing the functionalities that we've been hard at work building. As we look to revenue in the future from BFF, there are really multiple pillars of opportunity and one of them would be advertising. So this year, we have continued to see high demand from partners. This is a very interesting audience to a lot of partners, to a lot of advertisers. So we will be looking at taking in functionalities to be creator economy efficient or advertising ready for the future, but not to expect any near-term revenue from that.

Very helpful details. Thank you, both.

Thanks, Dan.

Thank you. Our next question or comment comes from the line of Benjamin Black from Deutsche Bank. Your line is open.

Ben, we can’t hear you.

-- describe demand for online dating services in regions that are? Can you hear me?

Yes, we can.

We can, now.

Now, we can hear you. Can you repeat your question though? Ben?

Sure.

Can you repeat your question?

I was just asking about the reopening. And if you could describe -- yes, hello.

We can hear you, Ben. Go ahead.

How would you describe the demand for online dating services in regions?

Sure. I think the question -- I hope….

Sorry. I will try it again. Thanks. So how would you describe the demand for dating services in regions that are fully reopened? And how does that compare to, sort of, pre-pandemic trends? And then perhaps one for Anu. When you're looking at the full year margin guide, how should we be thinking about cadence of margins throughout the year? And what are some of the swing factors that could potentially drive upside?

Sure. Well, why don't -- I'll start with the demand question, and then we'll turn it over to Anu. So I think, it's fair to say we haven't yet seen any markets we would consider to be fully reopened. So what I'm going to say is more about markets that are reopening in some way in markets that are fully reopened as we look at mobility indexes and restaurant reservations and things like that, we think the markets are still recovering to pre-pandemic levels. However, what we are seeing in general is that demand for dating services, particularly if I just take Bumble as an example, demand for Bumble is incredibly resilient. We are seeing that people are very eager to continue meeting other people and that what -- the work we've done in the last couple of years to really strengthen the offering inside of Bumble in an IRL context, and in real-life context or what we call a hybrid dating experience is really starting to pay-off. So what we see in these markets is that you have a higher willingness to get people who have been standing on the sideline to come into the online dating world. Again, these are early trends as opposed to a full reopening that we are seeing in any particular market, but you see people more willing to come off the sidelines and start dating. So there's some level of the pent-up demand that we've talked about in the past. What you see is that, if I look at Bumble, as an example, even as markets have gotten better, engagement inside of Bumble and inside of Badoo has actually remained high. Our retention rates are actually improving quarter-over-quarter. Our payer penetration on both apps is improving quarter-over-quarter, things like that. And so we are seeing a continued level of engagement and a lot of the work that we're doing from a product standpoint and a marketing standpoint is what you mentioned, is focusing on used cases that help users in that hybrid world. So things like the Bumble IRL campaign that we've got going on right now with, the partnerships with SoulCycle and James Beard Foundation, and live music venues and things like that. That is all focused on helping you connect with other single people in the real world facilitated by the Bumble App. So we do think that we are starting to see that transition and that the trends are very much pointing to us being a companion app in that in real-life hybrid experience as opposed to it being a binary either/or type of situation.

Yes. And to your question about margin. So -- and as we've said in our guidance, we expect Q2 to be around 24% at the midpoint. Obviously, this includes the additional $4 million that we expect to pay for Google Play billing. Our guidance for Q2 assumes that we will be spending more on marketing ahead of the summer which are obviously very important months for us, especially, you know as it relates to what part he was talking about in terms of people meeting in real life. So we are definitely gearing up for that. We also have some newer launch markets, such as Chile that we launched in April that we want to spend money on just on creating some buzz. As always, our goal is to be very disciplined. And if we feel like we don't see the ROI in any market or if we feel like a market isn't ready for some of our bigger brand campaigns, we will definitely pull back. So it's definitely something that we are very good and disciplined in doing and you'll see us doing that throughout the course of the year. Obviously, we have good flow-through in our business. So as we go through the rest of the year, especially in our second half, our marketing spend as a percentage of revenue will be lower than where we are today. And so we feel very good about hitting our overall guidance range. And our -- from a long-term perspective, we've always said that our goal is to continue expanding our margins and nothing has changed as it relates to that. We are very committed to being disciplined in terms of how we spend money. And again, just to remind everyone, the shared cost nature of our business allows us to share infrastructure, share knowledge across our apps, which is a big benefit for us in the long-term that automatically leads the leverage for us. So we are excited about our investment plans. But at the same time, I think we've demonstrated in the past and we will continue to demonstrate in the future that we will show financial discipline as we continue to grow.

Great. Thank you.

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

Great. Thanks. I just wanted to put a finer point on the earlier question around Google Play billing. Would second quarter Bumble brand net adds have been higher, if not for the mandate or you see no impact and it's just purely a mix shift from one day to seven day? And then my second question is just on the complement feature. I guess does that allow men to effectively message women first? Maybe just talk a little bit more about how that works and how it's impacted conversion or matching rates? Thanks.

Sure, I'll take the first one. I think we are -- I think generally, on Bumble and Badoo, we think that we've largely mitigated the issues, both from a paying user standpoint as well as from a revenue standpoint. As we say, we normally -- we are solving for revenue growth as opposed to any particular submetric underneath it. So there may be a little bit of give and take in there simply based on the normal optimization that we do and the personalization that we do, but that would be very much again, on the margins learn, I think that for the most part, we feel like we're not -- we've mitigated our way through the changes, particularly on Bumble and I'd say still rolling it out very pleased with what we're seeing on the Badoo side.

Yeah. And as far as complements go, I think it's important to step back and look at how the product works today. We launched very intentionally with putting women in control to give women a more empowering experience over their dating lives and their relationships and ultimately to remove a lot of rejection that men suffer from when historically dating online or even in the real world. And it's obviously proven to be a very empowering experience, but also a very successful business model. That said, there is a lot of room for opportunity in the discovery side of the product, meaning pre-match. So what we mean by pre-match is, right now, in order for a heterosexual connection to take place for a man and a woman to connect, there has to be a mutual like, so that in our instance is a swipe right from both parties, and then the women must initiate. This creates a certain layer of friction for a man to express himself to showcase his personality or to perhaps very respectfully capture the attention of prospective match. Therefore, complements really give the opportunity to stand out. We expect this to have a profound impact on the pre-match experience. This really leans into discovery. And so this is just one of many examples of how we can further accelerate engagement and a more robust experience before that match takes place, and we're very excited about it.

Great. Thank you.

Thank you. Our next question comment comes from the line of James Heaney from Jefferies. Your line is open.

Great. Thank you for taking my questions. It would be great, if you could just hone in a little bit more on the growth that you're seeing, both in payers and ARPPU just in the US alone, curious to hear more about that market? And then my second question is around, how you're thinking strategically about marketing expenses? Just talk about some of the geos where you're seeing really strong ROI on that brand spend and where you think you can lean in more heavily and maybe then just talk about some of the markets where you pulled back and where the ROIs aren't there yet? Thanks.

Yes. Sure. Happy to. So, we're not obviously breaking out payer and ARPPU numbers by market. But just, if you think about it, US still continues to be one of our largest markets. And we have a pretty large MAU here. And as you think about payer penetration, there's still tons of room for us to grow in terms of getting more of these premium users into our paid funnel. So that is definitely something that is a focus area for us. With me was just talking about new features such as complements that absolutely are going to be a big driver of that. And as we think about ARPPU as well, we are constantly optimizing for pricing in different markets, not just between countries, but even within the US. The US is obviously a very large country. And as we think about propensity to pay, it differs between if you're in New York versus if you are in a different states. So we’re constantly looking to make sure that we are looking at local geographic trends, both for -- both based on geo, but also based on segments of the population. So again, we've talked a lot about subscription bundles for a student type -- college students as an example. That will be something that will be more of a payer penetration impact and less of our ARPPU impact, but we could equally be thinking about subscription bundles for a higher price here, for example. So there are lots of things that we have on our product road map, that we believe will absolutely be improving payer penetration, as well as ARPPU in the US in the long term. And as we think about marketing, I think our philosophy on marketing hasn't changed. We've always said most of -- a majority of our users today and have always come from what we call our organic marketing, which is really based on our brand. It's on the field marketing. It is the virality that happens as we enter a new market. And so our strategy for entering a new market is still very, very consistent with respect to how we started back in the early days of Bumble in the US. So that really hasn't changed. And the beauty of that approach is you build a brand from ground up in every market. And then once the brand starts to resonate in -- at a micro city level then the flywheel takes effect and then the growth really starts to happen. And that is truly our secret sauce, and we've been excellent in the past. And it's something that you'll see us continue to do as we enter new markets. Next question please.

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

Great. Thanks. Two questions. First, thanks for the color on the paying user growth acceleration of Bumble App in 2Q and 3Q. I'm just curious, does this guidance assume kind of a pre-Omicron level of opening or does it assume kind of a pre-COVID or pre-pandemic level of opening? And then the second question, which I knew you might have just answered a little bit on expansion in non-English-speaking markets, it seems like it's going well. What's kind of working in terms of ramping the brand awareness and paying users? Thank you.

Yes. With respect to the first question, we are not assuming any big bounce back to pre-pandemic levels yet. I think our guidance assumes -- what we are seeing today in terms of people wanting to engage, we also recognize that some folks are still cautious about wanting to meet in person. So, clearly, you could say it assumes the Omicron levels, but it doesn't really assume the summer of love [ph] that a lot of us have been waiting for, but it hasn't really materialized. Obviously, if that happens, we feel well prepared in every market that we're in that we can take advantage of it. But we haven't seen that yet and so we have not yet predicting that. Tariq?

So, -- hi, this is Whitney. I'll take the second part of the question. So, as it pertains to our international markets, I think it's really important to just note that women globally resonate with our product, with our brand, with our offering. And this is something that we have proven time and time again now that women, regardless of where they are, there is a fundamental need for respectful safe, trusted, and women-first connections and relationships. And so that's been our strategy and our approach from day one, and it's so authentic to who we are across the board. And so within these international markets, we're very proud of the continued progress, particularly across Western Europe and Southeast Asia, India, Latin America. In Q1, as mentioned, Bumble App became the second most downloaded dating app in Germany and revenue really across the broader dock region almost doubled year-over-year. This is attributed a bit to what Anu is just saying to our on-the-ground field marking approach, which is so grounded and rooted in our mission, and that's the most important piece here is that this is so foundational to how we build not just our marketing strategy, but our product through and through. And we are excellent at localizing for these markets. So, as we venture into new territory cities and end markets that are non-English-speaking, we take such a localized approach, but it all has that same thread in DNA of women-first trusted and this is really what has driven that word of mouth. And another note here is that we drive success when two people connect on our products and they find success, whether that's romantic relationship or friendship, that becomes our strongest marketing vehicle. That is the flywheel for further acceleration in their networks. So, there's so many network effects taking place, which really is replicated in all these new markets. And that's how we're thinking about really engineering that in all of these new territories.

Thank you.

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

Great. Thanks for taking the questions. Just a couple of ones. So first, a big picture question on app stores generally. Your competitor is taking a different approach with Google. You guys have chosen to make the updates on the app to comply. Just curious, are you happy with this fee arrangement with the app stores? How should we think about your position more broadly with Google and Apple? And then, maybe a question for Anu. Can you clarify on your guidance? Sorry, if I misheard this. I think you said at current FX levels, we should expect revenues for full year be coming in at the lower end of the range. Did I hear that correct? And what does that mean for the core Bumble full year revenue guide? Thank you so much.

Sure. So maybe I'll start with the app stores. I think I'll say this in the context of Google and Apple are very good partners of ours. We are very happy with the level of partnership we have even if we have disagreements on different parts of the business. If I look at some of the moves that have been made, were, of course, thrilled about Google reducing the rate on subscription revenue from 30% to 15%. We feel that was a very good step in the right direction. We are also -- we're very encouraged by seeing the user choice program that they are piloting with Spotify. At the same time, we're disappointed that it was such a restricted pilot, right? And of course, we believe we've got a strong track record, both on the trust and safety side as well as on the third party payment side. And so we are -- they said that they are taking applications for people who would want to be next in the pilot. We are actively in discussion with them about participating in something like that, whether they choose to do it and how quickly is really up to them. But, we definitely have the ups and downs in the relationship, both with Google and Apple. But in general, we are partners, and we were going to keep working with them in a partnership way to further our business so.

Yeah. And to your other question, so yes, so if you recall, last earnings call in March when we gave our full year guidance, we had estimated FX headwinds of about $20 million. Obviously, the dollar has strengthened in the last eight weeks since we gave earnings guidance and we have -- we are calling out an additional $8 million of FX headwinds on top of the $20 million that we already called out. And so, assuming that those FX rates persist, we now expect to be at the lower end of the guidance range. And if obviously, the FX environment right now is extremely volatile, and we are not attempting to predict what FX will look like. But right now, based on what we are seeing, we expect that $8 million will be an incremental headwind. If that would not materialize, we would effectively be doing better than we thought we would do back in March. And our Bumble App guidance has not changed. We still expect to be in the 34% to 36% guidance range that we gave last time.

Got it. Okay. Thank you.

Thank you. Ladies and gentlemen, that will conclude the Q&A session at this time. Thank you for your participation in today's conference. This concludes the program. You may now disconnect. Everyone have a wonderful day.