Bumble Inc. (BMBL) Q4 2022 Earnings Report, Transcript and Summary

Good afternoon, ladies and gentlemen, and welcome to the Bumble Inc. Fourth Quarter 2021 Financial Results Conference Call. [Operator Instructions]. This call is being recorded on Wednesday, February 22, 2023. I would now like to turn the conference over to Cherryl Valenzuela, VP of Investor Relations. Please go ahead.

Thank you for joining us to discuss Bumble Fourth Quarter and Full Year 2022 Financial Results. With me today are Whitney 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 made on this call today are forward-looking statements. These forward-looking statements are subject to various risks and uncertainties and reflect our current expectations based on our beliefs, assumptions and information currently available to us. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Descriptions of factors and risks that could cause actual results to differ materially from these forward-looking statements are discussed in more detail in our earnings press release and filings with the SEC, including our annual report on Form 10-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.

Thank you, Cherryl, and thank you all for joining us today. Q4 was a strong finish to the year with total revenue of $242 million and adjusted EBITDA of $60 million, both exceeding our outlook. In 2022, we continued to execute against our strategic priorities, advanced our mission and delivered strong revenue growth and profitability for our shareholders. Bumble Inc's. revenue for the full year reached $904 million, up 19% year-over-year, with Bumble App revenue growing 31% driven by a year-over-year increase of over 500,000 paying users. We also drove strong profitability, delivering full year adjusted EBITDA margin of 25% and free cash flow of $117 million. These results are a testament to the hard work and execution of our teams around the globe who continue to execute incredibly well amidst geopolitical and macroeconomic uncertainty. These results also demonstrate the enduring power of our mission to create a world in which all relationships are healthy and equitable by a connection. Now let me touch briefly on each of our brands. Bumble App had a strong fourth quarter with revenue of $191 million, up 28% year-over-year. This strength was broad-based with strong revenue growth in both our established markets as well as in growing markets such as Germany, Spain, France and India. Bumble added over 130,000 paying users in the quarter. Based on third-party data sources, in Q4, we continued to grow download share in key markets like the U.S. and Canada, and maintained our position as the #2 most downloaded dating app in these markets. We are also excited to say that as of Valentine's Day, Bumble App is the most downloaded dating app in our top markets, including the U.S., Canada, Australia, the U.K. and Germany. Bumble App's Net Promoter Scores in the U.S. during the fourth quarter led other online dating apps, especially in 2 of our most important audiences, women and Gen Z. Our 2023 plans extend the momentum we have generated over the last several years. These are built on 4 pillars: one, continuing our rapid global expansion; two, reinforcing our brand and product strength, especially with women; three, growing revenue through new monetization experiences; and four, remaining a leader in safety by design. Let me describe each in turn. First, global expansion has been core to Bumble's growth in recent years, and we believe there is still tremendous runway in both existing and new markets. Building depth and expanding into secondary cities are a critical component of our growth strategy. For example, we've been in Germany for a couple of years now, and it continues to grow rapidly as we push into more cities beyond the original launch markets and is now on track to be our third largest revenue market in 2023. We will also be launching in new countries this year. One advantage we have in most markets around the world is a strong baseline level of demand due to the resonance of our brand and our women-first approach. We'll be building on this foundation with active go-to-market efforts to further our expansion in Western and Central Europe, for example, in Italy, Portugal and Poland as well as major Latin American and Southeast Asian countries. Second, Bumble is where it is today because of our brand strength and loyalty, especially with women, and this remains our priority. We listen intently to our women customers, and we've been steadily launching new features that are most requested by them, including our Astrology Tuesday offering last year. And this year, we expect to launch a series of enhancements to the Beeline, the matching experience and roll out new women focused offerings. We are further investing in our college programs to continue our share gain with Gen Z women. As we mentioned last quarter, we recently launched a dedicated customer experience for users who are verified college students. We have seen several hundred thousand college students verified on our platform, and we believe the dedicated experience is resonating. We are also using the fair expectation program to improve targeting of our college bundles and recently launched virtual guests to this group. Our early test suggests that virtual gifts lead to almost 20% higher reciprocation rates, especially with Gen Z, and we are optimistic about the future of this initiative. Machine learning and data science have been strong enablers of Bumble's customer experience and growth. We see more and more opportunities to integrate AI further into our user journey, ranging from helping them better optimize their profile and initiate chats to improving relevance and matching. Over the last 2 years, we have been working on rebuilding our recommendation engine with machine learning at the core. We've tested this new model in several markets in Western Europe over the last 6 months and saw a substantial improvement in voting behavior and double-digit improvements in match rates. In Q2, we expect to leverage this model to begin testing our new paid Best Bees offering, highlighting highly curated, highly compatible people to you. This brings me to our third pillar, creating new experiences to grow revenue. Over the last year, we've been performing foundational engineering work to build more modularity and agility into our monetization platform. This work was required to enable us to launch our next wave of monetization [indiscernible]. Going forward, this enhanced platform will enable the ability to launch new subscription offerings, additional bundles and a greater variety of a la carte offerings. It will also enable us to target these offerings in an increasingly precise manner to grow customer lifetime value. We will also use this sophisticated platform to accelerate our highly impactful pricing and promotional optimization initiatives. One feature the new platform has enabled is our message-before-match feature, Compliments, which is now fully rolled out with monetization in our major markets. We've seen strong initial user response in markets where we've launched, where we have seen Compliments to be 70% more likely to result in a match than a typical test mode. We are now starting to roll out the corresponding marketing plans. Compliments is our first major feature in the message-before-match space, and we are excited to build upon this with new offerings throughout the rest of the year. In addition to Compliments and Best Bees offerings, I'm also excited about the potential for our speed dating experience. In Q4, we transitioned from a branded partnership version of speed dating and launched it as a stand-alone unbranded experience in a number of our major markets, including the U.S., Germany and India. We are actively testing monetization approaches, including making the experience a ticketed events. Lastly, we know that [indiscernible] users, particularly those in their 20s, are looking for more ways to express themselves and their personality with a high level of authenticity. In Q2 and Q3, we will be experimenting with a range of new paid experiences leaning into this desire for self expression. This will include expanding our virtual gift offering as well as creating the ability to add stickers, mood [indiscernible] and photo effects to their profiles and chat, just to name a few examples. Our last pillar is safety by design and mission by design. Safety is not an afterthought or a marketing campaign for us. We remain fiercely committed to our mission and we are working relentlessly to create kind connections. Our approach at Bumble has always been to build safety into our products at the outset, and to continue to build new safety capabilities as we see these products in the field. We are also deploying an increasing amount of machine learning into our safety efforts. Our in-house content and photo moderation models continuously monitor our experience to prevent harassment toxicity. And we are experimenting with GPT-3 and other large language model services to further augment our already strong approach. Now turning to Bumble BFF. We remain the only scale dating app to have a successful friend finding offering due to our strong and unique brands. We believe the market opportunity around online friendship is sizable given the prevalence of loneliness with the U.S. Surgeon General sharing a 2018 to 2020 survey that revealed 60% of Americans struggle with loneliness. That figure climbs to 75% among younger people. To reflect this significant opportunity, we're increasingly managing Bumble BFF as a separate brand. We continue to be excited by the user traction on BFF, with now growth of 26% year-over-year in Q4, alongside strong global appeal. We have a very important set of product and marketing initiatives we expect to launch around midyear, which we believe will unlock further user growth and look forward to sharing these in the coming quarters. In summary, we have a lot of exciting initiatives planned for Bumble App in 2023, and we are off to a strong start to the year. Now turning to Badoo. We made solid progress in stabilizing Badoo in the second half of 2022. Despite facing some macroeconomic challenges, Badoo continues to have a large user base and was ranked among the top 3 dating apps by downloads in 48 countries, including Brazil, Italy, Mexico, Spain and France. Badoo and Other revenue also grew year-over-year when adjusted for FX and the impact of the conflict in Ukraine. We've focused recent product efforts on amplifying what Badoo's loyal and long-tenured user base appreciates most about the platform, how it creates quick and easy authentic connections, which has had a positive impact on user engagement and retention. The monetization platform enhancements that I mentioned earlier also applied to Badoo, illustrating the power of our shared platform model. A lot of our focus in 2023 is on continued optimization of our experience using these platform enhancements. For example, we now have a much greater ability on Badoo's offered promotional bundles and new consumables. And we'll be focusing on these to drive increasing payer penetration. In addition, we have a number of exciting new product features launching, all designed to lean into the chat-based experience on Badoo and drive faster time to quality connection. While we still have work to do to fully stabilize Badoo, we believe that we are on the right path. Lastly, I'd like to share an update on Fruitz as we celebrate the 1-year anniversary of its acquisition. Over the past year, its revenue contribution has steadily grown, and its integration with our shared platform has proceeded smoothly. In French-speaking markets where its organic growth has been most concentrated, Fruitz enjoys strong download share and Gen Z brand [indiscernible]. I have never been more excited about the tremendous opportunity for our brands, our business and our mission. We have solid user momentum and our apps have significant runway for growth. We also have a strong product road map and the team to advance it. We continue to be true to our mission of providing safe and kind connections by design. And as always, we will operate with financial discipline and a focus on execution. Thank you to team Bumble. Thank you for everyone's hard work. We succeeded only because of your dedication and contribution. I'd like to thank our customers, partners and investors for their continued trust and support. And with that, I will turn it over to Anu for a discussion of our financial results and outlook.

Thank you, Whitney, and good afternoon, everyone. I'll begin with a discussion of our fourth quarter and full year 2022 results before turning to our outlook for Q1 and full year 2023. Unless stated otherwise, the comparisons I will make refer to the fourth quarter of 2022 versus the fourth quarter of 2021. Total Bumble Inc. revenue in Q4 was $242 million, above the high end of our guidance and up 17% year-over-year, driven primarily by growth in Bumble App. FX was a $13 million headwind to top line, $3 million better than we had expected at the time of our guidance. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rate negatively by 8 percentage points. At a group level, revenue growth was driven primarily by growth in paying users, which increased 14% to 3.4 million, while average revenue per paying user increased by 1%. Revenue from Bumble App was $191 million, up 28%. FX was a $7 million year-over-year headwind, which negatively impacted growth by 5 percentage points. The headwind from FX was $2 million lower than we had previously anticipated. Bumble App revenue growth was driven by a strong 35% increase in paying users to 2.2 million. And on a sequential basis, we added 133,000 paying users. The strong growth in paying users was driven by a number of factors, including strong registration and reengagement rates, successful international expansion and product improvements that drove payer penetration. Bumble App's ARPPU was $28.64, down 6% year-over-year and 1% sequentially. The primarily due to country mix and FX impacts, partially offset by pricing optimization initiatives. Now moving on to Badoo App and Other. Badoo App and Other revenue was $51 million in Q4, representing a 12% year-over-year decline on a reported basis. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rate negatively by 17 percentage points. Badoo App and Other paying users declined 11% year-over-year to 1.2 million. The impact of our exit from Russia and Belarus roughly a 12% negative impact to growth. Badoo App and Other ARPPU declined 6% year-over-year to $12.48 primarily due to FX and country mix, partially offset by ongoing pricing optimization work. As a reminder, we currently include Fruitz revenue within Badoo App and Other revenue, but exclude Fruitz paying users from Badoo App and Other paying users. Turning now to expenses. We remain very focused on managing our business profitably, taking into consideration the dynamic macro environment. Total GAAP operating costs and expenses were $389 million for the quarter. On a non-GAAP basis, excluding stock-based comp and other noncash or onetime items, our total non-GAAP operating expenses were $182 million, up 19%. Cost of revenue was $67 million and grew 26% year-over-year. The increase was primarily driven by higher App Store fees resulting from revenue growth and mix shift between iOS and Android. As a percentage of revenue, cost of revenue was 28% versus 26% in the year ago period. Sales and marketing expenses grew 14% year-over-year to $65 million. This represents 27% of revenue versus 28% in the year ago period as we focused on efficiency and marketing spend during the quarter. G&A expenses were $34 million or 14% of revenue compared to $28 million or 14% of revenue last year. Product development expenses were $16 million or 7% of revenue versus $14 million or 7% in the year ago period. Q4 GAAP net loss was $159 million compared to a net loss of $14 million in the year ago period. This included an impairment charge of $141 million related to Badoo brand as a result of loss of expected revenue resulting from our business decision to seize operations in Russia and Belarus as well as the larger macro environment. Q4 adjusted EBITDA was $60 million, up 10% year-over-year and represented a 25% adjusted EBITDA margin. For full year 2022, total Bumble Inc. revenue grew 19% year-over-year to $904 million. In aggregate, FX headwinds and the Ukraine conflict impacted our growth rate negatively by 8 percentage points. Revenue from Bumble App grew 31% to $694 million driven by paying user growth of 34% to 2 million, leading to more than 0.5 million net adds during the year. FX headwinds impacted our growth rate negatively by 4 percentage points. Adjusted EBITDA was $227 million, representing 25% margin. Our GAAP net loss for the full year 2022 was $114 million compared to net earnings of $282 million in 2021. We continued to generate healthy cash flow with free cash flow of $117 million for the year. We ended the year in a strong cash position with total cash and cash equivalents totaling $403 million, up from $369 million last year. Now moving on to our 2023 financial outlook. As Whitney noted, we expect another period of strong profitable growth in the year ahead. For full year 2023, we estimate total Bumble Inc. revenue to grow between 16% to 19% year-over-year. We expect Bumble App to have another strong year. Based on the momentum we are seeing so far, our geo expansion plans as well as the exciting product road map we have, we expect revenue growth rate between 22% and 25%. While we believe that Badoo and Other revenue is on a path to recovery, our outlook assumes continued macroeconomic pressures on the Badoo user, along with ongoing pressures on advertising revenue. We estimate adjusted EBITDA margin will be 26%, representing 100 basis points of year-over-year margin expansion. For Q1, we expect the following: total revenue between $238 million and $243 million, representing a growth rate of 15% year-over-year at the midpoint of our range. Our outlook assumes approximately $10 million of year-over-year headwinds related to FX and the conflict in Ukraine, primarily in Badoo. Excluding the impact of this, our total revenue growth outlook would have been 19% at the midpoint. We expect Bumble App revenue to be between $190 million and $193 million, representing a growth rate of 24% year-over-year at the midpoint. Excluding FX headwinds, our guidance for Bumble revenue growth rate would be 27%. We estimate adjusted EBITDA will be between $53 million and $56 million, representing 23% margin at the midpoint of the range. Q1 margins reflect the typical high level of marketing spend we see at the beginning of the year. We remain hyper-focused and efficient around spending and have put in place several measures internally to ensure that we stay disciplined around our investment priorities. We are very confident in our ability to achieve our full year adjusted EBITDA margin target of 26% and also remain committed to healthy long-term margin expansion. In closing, our focus this year is on strong and disciplined execution against our strategic priorities. We believe we have an exciting opportunity ahead of us, and we are very confident that we can deliver strong revenue growth and profitability for our shareholders. And with that, operator, we can open it up for Q&A.

[Operator Instructions]. Your first question comes from Justin Patterson with KeyBanc.

Great. I wanted to just go a little deeper into some of the assumptions on guidance for the year. with me, you outlined a lot of product initiatives and geographic expansion. It sounds like it rolls out over the course of the year. Anu, could you kind of talk about how you embedded the impacts of that into the forecast and -- just getting a better sense of what's in the forecast and what could potentially be a surprise over the course of the year.

Yes. Justin, happy to take that. This is Anu. So as I said in my prepared remarks, for Bumble App, we have given a total revenue guidance range of 22% to 25%. We think this will, from a quarterly cadence perspective, be fairly stable every quarter. We're not expecting any big peak quarters. Obviously, we're starting Q1 off with good momentum. So we feel good about that, and then we feel good about what's assumed for the rest of the year. Similar to '22, we think the revenue growth comes from a healthy growth in paying users. So we are estimating net adds next year will be around the , mark. That's what we are projecting. And that would effectively imply that ARPPU is largely flat to '22 numbers, maybe slightly lower, again depending on where some of our product initiatives land. Now as a reminder, and we've always said this in the past, we are always focused on maximizing revenue versus just maximizing payers at ARPPU. So again, depending on how some of these product initiatives land, these numbers can shift a little bit up or down, but we feel pretty good about the net adds numbers, we feel very confident about the revenue range that we've given you. In terms of initiatives, a lot of the revenue improvement that you see next year largely comes from growth in our user base as well as a lot of the optimization work that we are doing from a product perspective as well as from a pricing perspective. Again, this is something that we are very, very good at doing, we've done historically. So we feel very, very good about the assumptions that we've made there. With respect to the product road map and new product initiatives that we have, like always, we model out what we think a lot of these product initiatives will look like through the course of the year. There are some products like Compliments that Whitney talked about that are -- have already landed in the market, we have real data coming from different markets. So we've made assumptions based on that and Compliments will be a sizable contributor to revenue in 2023. But then there are certain other product initiatives later in the year where we haven't yet landed those. So we've made some modest contribution assumptions. And then there are certain other product initiatives that we've not even included in our guidance ranges because, again, those are too far down. So that's roughly how the Bumble App guidance sort of falls out.

Your next question comes from Shweta Khajuria.

Could you please talk about the share gains that you were implying as of Valentine's Day on your app downloads? So the question is, what drove that? Was there a marketing effort that you had in Q1 specifically? And how sustainable do you think are these share gains that you're seeing across different countries? And then the second question is, Anu, could you talk about your confidence in margin expansion? You sound confident in delivering at least 100 bps of margin expansion. Help us think through your marketing efforts for the year.

Shweta, it's Tariq. I'll start with the share gain question and then turn it over to Anu. So we've been -- as you noted and as Whitney noted, I'm very pleased to see the traction that we've had on downloads, both in Q4, where we continue to gain share, and then in Q1, where we've seen a nice acceleration. To cut to the chase, we have not been spending to achieve that acceleration. There's not an outsized marketing spend that -- there is anything out of the ordinary that has helped us achieve that. We think really what's going on is a couple of different things. One is we are -- we think continuing to build momentum around the value proposition, the narrative around Bumble App, the success stories, and really fostering the word of mouth, we think that a lot of the programs like it started on Bumble, which we've talked about before, are really starting to have a cumulative effect. That's number one. Number two is there's a lot of work that our teams are doing around kind of harvesting demand that's already out there. So think about the App Stores and how you are capturing the demand that sits on the App Store, what's called App Store optimization, things like that. There's a parallel in the search engine world as well. We think that we've just continued to get better and better at that demand capture, of demand, whether that's Bumble specific demand or whether that is industry demand. And then that's paying off. And then we were fortunate in -- particularly in February, late January, to receive a lot of just very nice placement and promotions. We announced a partnership with Netflix, as an example. That resulted in a lot of activity in the Play Store and in the App Store itself, things like that. So it's not spend based where we're buying the traffic, but I think it's a culmination of a lot of the investments that we have been making. And so you can spend -- we don't, but people can spend to achieve market share gains. I think that it's particularly the download share. So we're happy with where we are today. We are happier just with the underlying trend that we have, and we're going to keep focusing on that as opposed to who's #1 and 2.

Yes. And Shweta, so your question about margins, like I said, I'm very, very confident about our ability to get to the 100 basis points margin expansion. And I said this in our last earnings call as well, as far as marketing spend goes, which again is one of our bigger line items. On 2023, we have a very high bar for how we think about marketing spend. Growing market share, as Tariq was just talking about, expanding into international markets, all of those are still big priorities for us. So we will definitely be spending money on building our brand. But we are taking a very hard look at every area of spend even in new markets as well as existing markets to make sure that all of those areas of spend are meeting the high thresholds that we have set for ROI returns, et cetera, et cetera. So you will definitely see that line item give leverage through the course of the year. Now as I said, Q1, always has elevated spends on marketing as you think about Date Sunday and Valentine's Day. So we do tend to spend higher in Q1. It was very similar to what we did last year as well. Our Q1 margin was our lowest quarter in the entire year. And then our EBITDA margin ticks up quite significantly as the year goes by. So I wouldn't read too much into the Q1 EBITDA guide. Again, a lot of the spend that we have during the year is very much in our control. So we feel very, very confident about it. The next big area of spend for us is, again, headcount. As we've said again previously, we are leading into areas of the business that are very critical to our growth. So you heard Whitney talk a lot about AI and machine learning and data engineering. So those are definitely areas that we want to continue to invest in as far as people and headcount resources are concerned, but we have a high bar for spend in other areas. So that's why, again, I feel very good about the target that we've set forth. And you'll see us continue to sort of reiterate that message as we go through the year.

Your next question comes from Cory Carpenter with JPMorgan.

Great. I wanted to come back to the Best Bees offering that you teased a little earlier. Could you expand on that a bit? Is that something that would be in perhaps like a new premium subscription package it sounded like or more of an a la carte offering? And then secondly, just on macro. You previously talked about a step down in late September, early October. How has that trended since then in terms of impact on renewal rates and consumables?

Cory, it's Whitney. So we're really excited about Best Bees. This is a paid offering. And I'll just give you a little background on how the feature works and then we can talk about how we're testing it from a monetization standpoint. So this is really a very exciting opportunity for all of our members to get access to a highly curated and really compatible set of people. So this is why we're calling it Best Bees. And so this is really going to be tailored to that specific user. And we think it's going to be really resonant across the board, geographies, gender, age groups, et cetera. And with the machine learning, there's a huge opportunity to provide more content-based nudges. And so anyway, all to say, we're very excited about this. How this will work? It is going to be a premium offering. We are going to be testing both different versions of that consumable subscription, and we will provide more updates with the rollout of that. The next question on macro. So I think it's very important to note that we're feeling very confident about the dating industry and about our results, the top of the funnel and engagement metrics continue to be strong. So overall, we're growing our paying users at a healthy clip. New subscriptions remain strong. And we're seeing good growth in consumable purchases. Where we did see some macro-related impact last summer was really around the subscription renewal rates for the more price-sensitive user groups. This was really Gen Z. But renewal rates have been stabilized at that lower level, and we've not seen further deterioration since last earnings. And we believe the strength of the business reflects the resonance of the brand, the resiliency of the majority of our Bumble user base and a lot of our recent product pricing and marketing efforts.

Your next question comes from Alexandra Steiger with Goldman Sachs.

So Whitney, you discussed virtual gifts as part of like the college bundle. How do you think about the monetization potential of virtual goods as a stand-alone product? And then also, thanks for providing an update on BFF. How should we think about potential monetization avenues and the timing of that?

Thank you. So I'll take BFF, and then Tariq is going to jump in. So I just want to reiterate that BFF remains an important priority for us in 2023. And the market opportunity with platonic friendships, we feel it's going to be equally as important as finding love. So I just want to reiterate this post-pandemic loneliness has become even a bigger concern. So I want to just reiterate that this is a high priority for us. As far as monetization grows -- goes, we are not factoring this into our guide for 2023, but we are really excited to be testing some product initiatives around monetization as far as models go later in the year. So we'll update you as the time comes. And Tariq, you can jump in.

Yes. On virtual gifts, we are -- we just launched virtual gifts to that college population that Whitney talked about, and we're seeing a very nice reception from that group, high conversion rates when we are presenting the opportunity. So we do think that we're on to something here with virtual gifts. We are, in fact, also seeing a much higher reciprocation rate, meaning if you send a virtual, gift you're much more likely to get a response. And so it's adding to the overall health of the ecosystem and value that we're creating for our users inside of the app. So we do think that there is something here we're excited about what we're doing on the college side. And I think our basic premise on virtual goods is we know that there is a very strong Gen Z opportunity here. We're really looking at how we can put together a bundle, a package of offerings for Gen Z that really leads into this notion of express yourself and self-expression. And so a virtual gift helps you stand out in a different way than you would otherwise, there are other things that we can do to let people express themselves authentically. So you should expect to see us roll this into other kind of packages and bundles targeting Gen Z in particular.

Your next question comes from John Blackledge with Cowen. I'm sorry, your next question comes from David Malinowski with Bank of America.

It's David on for Nat Schindler. Is it just possible to dive a little bit more into Badoo's improvement in the back half of the year, and maybe just look at what a steady state might look like for the first half of '23 or beyond that?

Yes. So Badoo -- I think it's important to reinforce -- and thank you for the question. Badoo remains a leader in its key markets. So it is a top 3 app by downloads in dozens of countries across Latin America, Central and Eastern Europe and Asia. And it does have this long tenured and loyal global base. So we are continuing to operate from a user standpoint with a lot of strength. On the revenue side, we made solid progress in stabilizing Badoo in the second half of '22. However, we do acknowledge that there's more work to be done to resume Badoo's growth trajectory. And we know that the Badoo customer continues to be sensitive to inflation and macroeconomic pressures. This really results in an overall lower propensity to pay. So our goal is to meet our Badoo customer where they are. So in 2023, we're going to tap our enhanced monetization platform to offer promotional bundles and new consumables to better serve these customers with their price point ability.

Yes. And just to add, I think from a -- what we are building into our outlook for the year, we do expect that Badoo net adds will continue to be negative in 2023. We definitely think that ex impact from Russia, Belarus, et cetera, the net negative that we saw in 2022 will -- and versus what we will see in 2023 will be better. So 2023 should definitely get better. But also, we still think it will have negative net adds. Q1 is probably going to be the most negative. So right now, we are projecting about negative for Badoo in terms of paying users between Q4 '22 and Q1 '23. But as the year goes by, we should definitely start to see that recover. And we are doing a lot of work from a product perspective, as Whitney said, from a pricing and promotional perspective to make sure that the path that we have put Badoo on continues to deliver well.

Your next question comes from John Blackledge with Cowen.

Two questions. First, on the international expansion. Just -- if you can provide some more color on how those efforts are going and perhaps give us an update on key country launches in the first quarter in 2023? And then second question, on the new recommendation engine that you're using in certain European markets, do you expect to roll it out in the U.S. and other key markets and kind of any way to offer some color on the uptick in matches with the new rec engine?

Sure. John, I'll take both of those. On the international expansion, our focus is really two-pronged. Part 1 is continue to expand into new markets where we see opportunity. Part 2 is where we have already expanded to go deep -- and deeper and deeper into those markets. The job is not done when we launch in a country. And on both fronts, we feel very pleased that the playbook that we've got is working really well. So if I take the go deeper piece, as an example, we're still seeing rapid growth in Germany in the DACH region, the German-speaking regions in France and other parts of Western Europe that we have launched in. And we're expanding both to more segments in our core cities and to new cities. That's also true in India, where we're seeing very, very rapid growth as well. And a lot of that is, if you will, geo expansion inside of India as well as continuing to go deeper in the key cities like Mumbai that we're already in. So that playbook, we think, is working well and is allowing us to continue to gain market share. And to refresh everyone's memory, the historical focus has been in Western Europe South and Southeast Asia, Indonesia, Philippines, Singapore and parts of Latin America, particularly Mexico and the southern parts of Latin America. As it comes to new market launches, we're really focusing this -- at least the first half of this year on the other markets in Western and Central Europe that we believe have a strong opportunity. So -- and I think Whitney mentioned Poland, Italy, Portugal and Nordics as key markets we'll be focused on. But again, it really is in combination with these go deep efforts that we've got as well. Moving on to the recommendations engine, we are absolutely expecting this to be a global rollout. We -- as you recall, we obsessively test our products to make sure that they work. We do that with different segments or in different geographies. So for this machine learning-based recommendation engine, we started it in certain markets in Western Europe, are seeing great results, which I'll speak about. And so now we are actively training the model in other geographies so that we can bring it globally as we use it for the Best Bees offering as an example that Whitney mentioned. We would expect over time that to be a global offering, not just a Western European offering. And the results that we're seeing, as you mentioned, are really quite substantial. We are seeing double-digit increases in match rates when you're presented with this sort of super compatible recommendation versus our already very good recommendation engine that we've got, the non-machine learning centric model. So we think that we're really adding a lot of incremental value on top of an already strong product, and that's what we think will allow us to monetize this further.

Your next question comes from Mark Kelley with Stifel.

Great. I want to ask you just about the marketing spend. I know Q1 is usually -- it steps up for you. With one of your main competitors commenting a fairly large brand campaign for one of their products, does that factor into how much you think you need to spend or maybe that -- maybe that doesn't? But I would imagine you would argue that maybe that one product I'm talking about is not a perfect comp to yours, but any thoughts there would be great. And then second, just on the college focused product, is there a way to think about how many of those college users that you called out were incremental as a result of that launch?

Sure, Mark. So on the marketing spend piece, we've always taken, and number one, a very organic approach to our marketing. The marketing on Bumble App, in particular, is very focused on the strength of the brand and the mission and all of the work that we've done since day 1 of founding the company, and a large amount of our acquisitions come in because of that organic. So that remains core to how we think about marketing. On the sort of more discretionary pieces, the media-driven, the performance-driven pieces on top of that, we've operated and will continue to operate a very disciplined approach here. We're very ROI-centric. You'll recall that we've got payback periods on our marketing spend that are very, very short, which allows us to really manage this at a pretty fine-tuned level. So with one or more competitors out there spending a lot, we're having to be more nimble and find opportunities to really go out and make sure we're not overpaying for certain types of inventory. But historically, when people have spent up, we haven't had a big concern about that, and we're not -- we are seeing a spend up in a number of regions. And we're not seeing a big concern as you can see our downloads continue to grow. So we feel very good that this disciplined approach and the heightened efficiency we build in the marketing is working. On the college side, a lot of the emphasis is on being able to speak to college students in a much more targeted way. So it's not really a user acquisition program at its core. What it is, is -- we're building the ability to offer a product experience that is different and customized. And that is -- and a marketing program that is customized as well. And so with the verification program, we're having that ability to offer, say, college bundles, virtual gifts on a very targeted basis. It is, we're finding, leading to word of mouth. Like, people like the experience and so that will lead over time, we think, to strengthening the depth that we've got with college students. Whitney, would you like to add anything?

I just want to add that we have such loyalty with the college audience. Our Honey program has been a standout in our marketing for years and it continues to grow. And so our relevance and our authentic residence with college students is something that we feel really cannot be replicated at this point. For example, I myself -- on behalf of Bumble, I'm starting a college tour this Monday, where I'll be speaking directly with a lot of students. And so I feel like we have this really unique and authentic approach with Gen Z.

Your next question comes from Ben Black with Deutsche Bank.

Great. Just sort of a follow-up to the last question. So your competitors are rebranding to better connect with Gen Z. So I'm curious to hear what's really driving your success across these users? Is it marketing? Is it product related? And how do you feel positioned competitively there? And then secondly, I think you're included in Google's User Choice Billing program. Curious how that potentially impacts you from a financial perspective, if at all. And how that could potentially help them a product launch or product flexibility standpoint?

This is Whitney. Thank you for your question. I'll start with Gen Z, and I'm going to weave women into that a bit as well. So as I said on my prior response, since the inception of Bumble, college has been such a huge pillar of our strategy. And we have been able to consistently stay hyper relevant with that community and to really reinvent ourselves year-over-year or quarter after quarter. And we have this unique ability to connect with the freshman as much as we do with the seniors. We also have this strong resonance to graduate with them, right? We've built ambassador programs even beyond college with the alumni. So we've also really now taken a super granular lens on building products designed to engage that audience better. So we are performing really well with this audience even prior to these optimizations. So we're feeling really good about the potential as we really iterate the product to be even more resonant with them. The one thing I do want to double-click on here, too, is Gen Z cares deeply about brands that are authentic and take a stance and are really mission oriented. So this is something that is working very strongly in our favor. We have been a very mission-led, very customer-first brand for 8 years. And this is really resonant. So one other quick note on the Gen Z topic. Women, Gen Z, millennial or otherwise, this is our brand moat. We have the brand strength and the identity that we do because we have built for women from day 1. And we are taking that lens with Gen Z as well. So this is not an opportunity for a competitor to just market or speak to women, that is something that cannot be replicated with a marketing strategy. That's something that has to be authentically core to the DNA of a brand. And so I will tell you personally, this is something I feel we have a strong moat. And I'm really proud of our team for being able to sustain that. Tariq, would you like -- or Anu?

On User Choice Billing?

On User Choice Billing, we don't expect that to have any impact on margins, as you know. We will still end up paying in aggregate the 15% that we pay to date to Google Play. The composition of that is just going to be different. So from a margin perspective, we don't expect that, that will have any impact at all. We are still very much in testing phase of what User Choice Billing looks like. And so if we have any particular updates to share on that, we will in the subsequent quarters.

Your next question comes from Deepak Mathivanan with Wolfe Research.

This is Zack on for Deepak. I guess just first on just price increase potential. Obviously, we were kind of in an elevated inflation environment. We've seen several consumer subscription services kind of utilize the price increase lever over the past several months. So just curious how you're kind of thinking about pricing increases philosophically on the core Bumble side. And if that's the lever that you guys are kind of looking at to kind of pull this year? And then second, just you've outlined a robust product pipeline, geographic expansion. How should we think about kind of the head count growth needs this year?

So I'll start with the pricing question. I mean, price -- as we think about a price optimization and pricing analytics and price testing, they're all core to the DNA of Bumble. And it's something that we do on Bumble, Badoo and on Fruitz on a literally daily basis. And really are constantly trying to understand what is the elasticity a particular user might have and then adjust prices up or down as it maximizes revenue, to Anu's earlier point. And so where we do see opportunities to increase and generate more revenue, by doing that, we will take advantage of that. Same on the flip side, right, where it's advantageous to decrease. I would say at the moment, we're not seeing a material change in appetite to pay or willingness to pay because of inflation. And there's, I think, 2 sides to that coin that other prices are going up, so you might have some more forgiveness, if you will, if you raise -- but wallets you're getting stretched. So it's a very segment-by-segment analysis that we go through, but we're -- it's a very active muscle that we exercise.

Yes. And I think second question was around head count and how we think about where we expect to invest this year. So like I said earlier, we do want to lean heavily into making sure that our products and the teams have the best talent that we need to continue to be an innovator in this space. So all the stuff that you heard earlier around what sort of product road map monetization especially as it relates to newer things that we have around AI, machine learning, et cetera, et cetera, that -- those are areas of headcount we want to invest in. We have a very sophisticated team already in place for things like pricing, revenue monetization, et cetera, et cetera, that we will be leveraging quite extensively. And again, remember, we operate from a shared platform infrastructure. So once we create a certain product initiative for Bumble, we are able to replicate it quite easily for Badoo and also take that learning in -- this year to Fruitz as well. So that's definitely a lot of synergy as you think about knowledge sharing that happens between the product and tech teams for each of these apps. From a marketing perspective, we've never been one of those companies that requires brand-new teams to show up in every market that we go to expand in. We are very, very nimble about how we think about growing in every market. We often talk a lot about on the ground field marketing, but that involves us hiring the local influencer on the ground that doesn't require us to go and hire headcount and big teams on the ground. So again, you'll see us continue to be very efficient from a geographic expansion and marketing spend perspective. And lastly, I will say, from a corporate infrastructure perspective, I think we have largely -- this is -- we've just completed 2 years of being public. We have largely built out. We have a couple of pockets here and there that we still have to sort of fully built up. But really, I think investment in G&A is largely done. And again, you should expect to see leverage as the next -- as this year goes by and obviously in the future as well.

Your next question comes from Steve Koenig with SMBC.

That's pretty close. Yes, Steve Koenig. This one is probably for you, Whitney. I'm curious how you think about maybe dating app fatigue in your more mature markets? And how do you position Bumble as positive contributor to mental health, enjoyable and fruitful. Maybe just your kind of philosophy around that, that would be interesting?

Yes. Thank you so much. So I just want to start by saying that we are extremely cognizant of the needs around dating and the needs around making it healthier, safer, kinder. I mean, this is our entire focus. Our tagline as a company is kind connection. So I do want to just reemphasize that people are meeting online. That graph is only going up. People will continue to meet online. This is a resilient industry. I have been in this industry for 10 years, and I can tell you that the demand remains stronger than I've ever seen. That said, I am personally taking it on my shoulders to figure out how to make it an even more enjoyable, even safer, more accountable experience. How do we really deliver what women want. And by delivering what women want, we make it a more enjoyable experience for everyone. But I will tell you that there is no disintegration of the want or need to meet people. And actually meeting online is a quicker, more time efficient but also more economically efficient option for so many people. For people to get dressed up every night and go out to restaurants and bars where it's expensive and it's stressful, I mean that is just not the reality. And so there is still such a huge opportunity here to take this strong demand for love and connections, which -- that is incredibly durable in and of itself, but to really continuously optimize our already very unique product and just drive exceptional value with strong engagement growth and as you see record paying user additions, I think we offer a very compelling cost effective and really efficient alternative to the big spooky world of dating in the real world. So we are committed to this, and we feel that with our share gain in particularly women and Gen Z, we are poised to have a great year ahead.

There are no further questions at this time. Please proceed.

Operator, you can just conclude the call. Thank you.

Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.