BUMBLE INC. You should read the following discussion and analysis of the financial condition and results of operations ofBumble Inc. (the "Successor") andWorldwide Vision Limited (the "Predecessor), in conjunction with our unaudited condensed consolidated financial statements and related notes included elsewhere in Part I, "Item 1 - Financial Statements (Unaudited)". This discussion contains forward-looking statements that involve risks and uncertainties about our business and operations. Our actual results could differ materially from those discussed in the forward-looking statements. Factors that could cause or contribute to these differences include, without limitation, those discussed in this Management's Discussion and Analysis of Financial Condition and Results of Operations and those identified under "Special Note Regarding Forward-Looking Statements" and Part I, "Item 1A-Risk Factors" in our 2020 Form 10-K.
Overview
Bumble operates two apps, Bumble and Badoo. We are a leader in the fast-growing online dating space, which has become increasingly popular over the last decade. We launched the Bumble app in 2014 to address antiquated gender norms and a lack of kindness and accountability on the internet. By placing women at the center - where women make the first move - we are building a platform that is designed to be safe and empowering for women, and in turn, provide a better environment for everyone. The Badoo app, launched in 2006, was one of the pioneers of web and mobile free-to-use dating products. Badoo's mantra of "Date Honestly" extends our focus on building meaningful connections to everyone.
Year-to-Date
For the three months ended
• Total Revenue of
respectively;
• Bumble App Revenue of
respectively;
•
respectively;
• Net Earnings (Loss) of
respectively, representing Net Earnings (Loss) Margins of 189.5%, (70.5)% and
(81.4)% respectively;
• Adjusted EBITDA of
representing Adjusted EBITDA Margins of 27.0%, 16.1% and 23.4%, respectively;
• Net cash used in operating activities of
103.2% and 10.2%, respectively; and
• Free Cash Flow of
respectively, representing Free Cash Flow Conversion of (104.8)%, (459.6)% and
(46.4)%, respectively
For a reconciliation of Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow
and Free Cash Flow Conversion, which are all non-GAAP measures, to the most
directly comparable GAAP financial measures, information about why we consider
Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Free Cash Flow
Conversion useful and a discussion of the material risks and limitations of
these measures, please see "-Non-GAAP Financial Measures."
34
--------------------------------------------------------------------------------Key Operating and Financial Metrics
We regularly review a number of metrics, including the following key operating
and financial metrics, to evaluate our business, measure our performance,
identify trends in our business, prepare financial projections and make
strategic decisions. We believe these non-GAAP and operational measures are
useful in evaluating our performance, in addition to our financial results
prepared in accordance with GAAP. See "-Non-GAAP Financial Measures" for
additional information on non-GAAP financial measures and a reconciliation to
the most comparable GAAP measures.
Three Months Three Months
Ended Ended
March 31, March 31,
(in thousands, except ARPPU) 2021 2020
Key Operating Metrics
Bumble App Paying Users 1,352.8 938.3
Badoo App and Other Paying Users 1,450.5 1,218.2
Total Paying Users 2,803.3
2,156.5
Bumble App Average Revenue per Paying User$ 27.75 $ 24.84 Badoo App and Other Average Revenue per Paying User$ 12.76 $ 12.26 Total Average Revenue per Paying User$ 19.99 $ 17.73 Successor Predecessor Period from Period from Three Months January 29, January 1, Ended through through (in thousands, except per share / unit data March 31, March 31, January 28, and percentages) 2021 2020 2020 Condensed Consolidated Statements of Operations Data: Revenue$ 170,713 $ 79,145$ 39,990 Net earnings (loss) 323,442 (55,809 ) (32,556 ) Net earnings (loss) attributable toBumble Inc. shareholders /Buzz Holdings L.P. owners 341,790 (55,761 ) (34,473 ) Net earnings (loss) per unit attributable toBumble Inc. shareholders /Buzz Holdings L.P. owners Basic earnings (loss) per share / unit $ 1.74 $ (0.02 ) Diluted earnings (loss) per share / unit $ 1.69 $ (0.02 ) Other Data: Adjusted EBITDA$ 46,080 $ 12,734$ 9,371 Adjusted EBITDA Margin 27.0 % 16.1 % 23.4 % Free Cash Flow (48,294 ) (58,523 ) (4,351 ) Free Cash Flow Conversion (104.8 )% (459.6 )% (46.4 )% (Unaudited) March 31, 2021 December 31, 2020 Condensed Consolidated Balance Sheets Data: Total assets$ 3,770,114 $
3,637,268
Cash and cash equivalents 246,002
128,029
Long-term debt, net including current maturities 629,538 826,214 Profitability and Liquidity We use net earnings (loss) and net cash provided by (used in) operating activities to assess our profitability and liquidity, respectively. In addition to net earnings (loss) and net cash provided by (used in) operating activities, we also use the following measures:
• Adjusted EBITDA. We define Adjusted EBITDA as net earnings (loss) excluding
income tax (benefit) provision, interest (income) expense, depreciation and
amortization, stock-based compensation expense, foreign exchange (gain) loss,
changes in fair value of contingent earn-out liability interest rate swaps and
external investments, transaction costs and one-time litigation costs.
Adjusted EBITDA Margin represents Adjusted EBITDA as a percentage of revenue.
• Free Cash Flow. We define Free Cash Flow as net cash (used in) provided by
operating activities less capital expenditures. Free Cash Flow Conversion
represents Free Cash Flow as a percentage of Adjusted EBITDA.
35
-------------------------------------------------------------------------------- Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Free Cash Flow Conversion are key measures we use to assess our financial performance and are also used for internal planning and forecasting purposes. We believe Adjusted EBITDA, Adjusted EBITDA Margin, Free Cash Flow and Free Cash Flow Conversion are helpful to investors, analysts and other interested parties because they can assist in providing a more consistent and comparable overview of our operations across our historical financial periods. In addition, these measures are frequently used by analysts, investors and other interested parties to evaluate and assess performance.
See "-Non-GAAP Financial Measures" for additional information and a reconciliation of net earnings (loss) to Adjusted EBITDA and Adjusted EBITDA Margin and net cash used in operating activities to Free Cash Flow.
Impact of COVID-19
InMarch 2020 , theWorld Health Organization declared the outbreak of COVID-19 a global pandemic. COVID-19 has rapidly impacted market and economic conditions globally, resulting in the implementation of significant governmental measures, including lockdowns, closures, quarantines, and travel bans intended to control the spread of the virus. While some of these measures have been relaxed in certain parts of the world as increasing numbers of people have received COVID-19 vaccines, others have remained in place with some areas continuing to experience renewed outbreaks and surges in infection rates. The extent to which such measures are removed or new measures are put in place will depend upon how the pandemic evolves, as well as the distribution of available vaccines and the rates at which they are administered. Future prevention and mitigation measures, as well as the potential for some of these measures to be reinstituted in the event of repeat waves or the emergence of new variants of the virus, are likely to continue to have an adverse impact on global economic conditions and consumer confidence and spending for some time, and could materially adversely affect demand, or users' ability to pay, for our products and services. In response to the COVID-19 outbreak, we have taken several precautions that may adversely impact employee productivity, such as requiring employees to work remotely, imposing travel restrictions, and temporarily closing office locations. We continue to monitor the rapidly-evolving situation and guidance from international and domestic authorities, including federal, state and local public health authorities, and there may be developments outside our control requiring us to adjust our operating plan. As such, given the unprecedented uncertainty around the duration and severity of the impact on market conditions and the business environment, we cannot reasonably estimate the full impacts of the COVID-19 pandemic on our business, financial condition and results of operations in the future. For additional information, see "Risk Factors-General Risk Factors-Our business and results of operations may be materially adversely affected by the recent COVID-19 outbreak or other similar outbreaks" in Part I, Item 1A. of our 2020 Form 10-K. 2021 Developments
Initial Public Offering and Offering Transactions
OnFebruary 10, 2021 , our registration statement on Form S-1 relating to our IPO was declared effective by theU.S. Securities and Exchange Commission , and our Class A common stock began trading on the NASDAQ onFebruary 11, 2021 . Our IPO closed onFebruary 16, 2021 .Bumble Inc. issued and sold 57.5 million shares of its Class A common stock in the IPO, including 7.5 million shares sold pursuant to the exercise in full by the underwriters of their option to purchase additional shares.Bumble Inc. used the proceeds (net of underwriting discounts) from the issuance of 9 million shares ($369.6 million ) to acquire an equivalent number of newly-issued Common Units from Buzz Holdings L.P, whichBuzz Holdings L.P. in turn used to repay outstanding indebtedness under our Incremental Term Loan Facility totaling$200.0 million in aggregate principal amount and allocated the remaining proceeds, after bearing all of the expenses of the IPO for general corporate purposes.Bumble Inc. used the proceeds (net of underwriting discounts) from the issuance of 48.5 million shares ($1,991.6 million ) to purchase or redeem an equivalent aggregate number of shares of Class A common stock and Common Units from our pre-IPO owners. We refer to the foregoing transactions as the "Offering Transactions". Reorganization Transactions Prior to the completion of the IPO, we undertook certain reorganization transactions (the "Reorganization Transactions") such thatBumble Inc. is now a holding company, and its sole material asset is a controlling equity interest inBumble Holdings . As the general partner ofBumble Holdings ,Bumble Inc. now operates and controls all of the business and affairs ofBumble Holdings , has the obligation to absorb losses and receive benefits fromBumble Holdings and, throughBumble Holdings and its subsidiaries, conducts 36 -------------------------------------------------------------------------------- our business. The Reorganization Transactions were accounted for as a reorganization of entities under common control. As a result, the consolidated financial statements ofBumble Inc. will recognize the assets and liabilities received in the Reorganization Transactions at their historical carrying amounts, as reflected in the historical financial statements ofBumble Holdings , the accounting predecessor.Bumble Inc. will consolidateBumble Holdings on its consolidated financial statements and record a non-controlling interest, related to the Common Units and the Incentive Units held by our pre-IPO owners, on its consolidated balance sheet and statement of operations.Bumble Inc. is a corporation forU.S. federal and state income tax purposes. BothBumble Inc.'s accounting predecessor,Bumble Holdings , andBumble Holdings' accounting predecessor,Worldwide Vision Limited , have been since the Sponsor Acquisition, treated as flow-through entities forU.S. federal income tax purposes, and as such, have generally not been subject toU.S. federal income tax at the entity level. Accordingly, the historical results of operations and other financial information set forth in this Quarterly Report do not include any material provisions forU.S. federal income tax for the periods prior to our IPO. Following our IPO,Bumble Inc. paysU.S. federal and state income taxes as a corporation on its share ofBumble Holdings' taxable income. In addition, in connection with the Reorganization Transactions and our IPO, we entered into the tax receivable agreement as described under "-Tax Receivable Agreement." Tax Receivable Agreement In connection with the Reorganization Transactions and our IPO, we entered into a tax receivable agreement with certain of our pre-IPO owners that provides for the payment byBumble, Inc. to such pre-IPO owners of 85% of the benefits thatBumble Inc. realizes, or is deemed to realize, as a result ofBumble Inc.'s allocable share of existing tax basis acquired in our IPO, increases in our share of existing tax basis and adjustments to the tax basis of the assets ofBumble Holdings as a result of sales or exchanges of Common Units (including Common Units issued upon conversion of vested Incentive Units), and our utilization of certain tax attributes of the Blocker Companies (including the Blocker Companies' allocable share of existing tax basis) and certain other tax benefits related to entering into the tax receivable agreement. We estimate the amount of existing tax basis with respect to which our pre-IPO owners will be entitled to receive payments under the tax receivable agreement (assuming all Pre-IPO Common Unitholders exchanged their Common Units for shares of Class A common stock on the date of the IPO, and assuming all vested Incentive Units were converted to Common Units and immediately exchanged for shares of Class A common stock at the IPO prices of$43.00 per share of Class A common stock) is approximately$2,603 million , which includesBumble Inc.'s allocable share of existing tax basis acquired in the IPO, which we have determined to be approximately$1,728 million . In determiningBumble Inc.'s allocable share of existing tax basis acquired in the IPO, we have given retrospective effect to certain exchanges of Common Units for Class A shares that occurred after the IPO that were contemplated to have occurred pursuant to the Blocker Restructuring. The payments under the tax receivable agreement are not conditioned upon continued ownership of the Company by the pre-IPO owners. We have determined that it is more likely than not that we will be unable to realize certain tax benefits that were received in connection with the Reorganization Transactions and our IPO. As a result of this determination, we have not recorded the benefit of these deferred tax assets as ofMarch 31, 2021 . The Company is entitled to certain depreciation and amortization deductions as a result of its allocable share of existing tax basis acquired in the IPO and increases in its allocable share of existing basis and adjustments to the tax basis of the assets ofBumble Holdings as a result of sales or exchanges in connection with the IPO. There is significant existing tax basis in the assets ofBumble Holdings as a result of the Sponsor Acquisition. Based on current projections, we anticipate having sufficient taxable income to be able to realize these tax benefits and have recorded a liability of$356.8 million associated with the tax receivable agreement related to these benefits. The realizability of the deferred tax assets is evaluated based on all positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies and recent results of operations. We will assess the realizability of the deferred tax assets at each reporting period, and a change in our estimate of our liability associated with the tax receivable agreement may result as additional information becomes available, including results of operations in future periods. Employee Equity Plans In connection with the Reorganization Transactions and our IPO, we undertook a number of modifications to existing employee equity plans such that awards under the Founder Plan, US Plan, and Non-US Plan were reclassified as follows:
• The Time-Vesting and Exit-Vesting Class
Founder Plan and granted to Senior Management under the US Plan were
reclassified to vested Incentive Units (in the case of Vested Class
and unvested Incentive Units (in the case of unvested Class
Holdings.
37
--------------------------------------------------------------------------------
• The Time-Vesting and Exit-Vesting Class
those granted to senior management) were reclassified to Class A common stock
(in the case of vested Class
stock (in the case of unvested Class
• The Time-Vesting and Exit-Vesting Phantom Class
were reclassified into vested RSUs (in the case of vested Class
Units) and unvested RSUs (in the case of unvested Class B Phantom Units) in
equity-settled, the RSUs were fair valued at the date of the IPO. In all cases of respective reclassifications, the Post-IPO awards retained the same terms and conditions (including applicable vesting requirement). Each Post-IPO award was converted to reflect the$43.00 share price contemplated in the Company's IPO while retaining the same economic value in the Company.
In connection with the IPO, we adopted the 2021 Omnibus Plan, which became effective on the date immediately prior to the effective date of the IPO. Under the 2021 Omnibus Plan, we granted equity awards as follows:
• Stock options with the underlying equity being shares of the Company's Class A
common stock. These stock options are inclusive of both Time-Vesting stock
options and Exit-Vesting stock options.
• Time-Vesting Restricted Stock Units with the underlying equity being shares of
the Company's Class A common stock.
• Time-Vesting and Exit-Vesting Incentive Units in
At the IPO date, we concluded that our public offering represents a qualifying liquidity event that would cause the Exit-Vesting awards' performance conditions to be probable of occurring. As such, we started to recognize stock-based compensation expense in relation to the Exit-Vesting awards. As ofMarch 31, 2021 , total recognized compensation cost related to the Exit-Vesting awards is$11.5 million .
For additional information, see Note 13, Stock-based Compensation, to our unaudited condensed consolidated financial statements included in Part I, "Item 1 - Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q.
Components of Results of Operations
Our business is organized into a single reportable segment.
Revenue
We monetize both the Bumble and Badoo apps via a freemium model where the use of our service is free and a subset of our users pay for subscriptions or in-app purchases to access premium features. Subscription revenue is presented net of taxes, refunds and credit card chargebacks. This revenue is initially deferred and is recognized using the straight-line method over the term of the applicable subscription period. Revenue from lifetime subscriptions is deferred over the average estimated expected period of the subscriber relationship, which is currently estimated to be twelve months. Revenue from the purchase of in-app features is recognized based on usage. We also earn revenue from online advertising and partnerships, which are not a significant part of our business. Online advertising revenue is recognized when an advertisement is displayed. Revenue from partnerships is recognized according to the contractual terms of the partnership.
Cost of revenue
Cost of revenue consists primarily of in-app purchase fees due on payments processed through theApple App Store andGoogle Play Store . Purchases on Android, mobile web and desktop have additional payment methods, such as credit card or via telecom providers. These purchases incur fees which vary depending on payment method. Purchase fees are deferred and expensed over the same period as revenue. 38
-------------------------------------------------------------------------------- Cost of revenue also includes data center expenses such as rent, power and bandwidth for running servers and associated employee costs. Expenses relating to customer care functions such as customer service, moderators and other auxiliary costs associated with providing services to customers such as fraud prevention are also included within cost of revenue.
Selling and marketing expense
Selling and marketing expense consists primarily of brand marketing, digital and social media spend, field marketing and compensation expense (including stock-based compensation) and other employee-related costs for personnel engaged in sales and marketing functions.
General and administrative expense
General and administrative expense consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in executive management, finance, legal, tax and human resources. General and administrative expense also consists of transaction costs, changes in fair value of contingent earn-out liability, expenses associated with facilities, information technology, external professional services, legal costs and settlement of legal claims and other administrative expenses.
Product development expense
Product development expense consists primarily of compensation (including stock-based compensation) and other employee-related costs for personnel engaged in the design, development, testing and enhancement of product offerings and related technology.
Depreciation and amortization expense
Depreciation and amortization expense is primarily related to computer equipment, leasehold improvements, furniture and fixtures, developed technology, user base, white label contracts, trademarks and other definite-lived intangible assets. Interest (expense) income Interest (expense) income consists of interest income received on related party loans receivables and interest expense incurred in connection with our long-term debt. Other income (expense), net
Other expense, net consists of insurance reimbursement proceeds, fair value changes in derivatives and external investments and impacts from foreign exchange transactions.
Income tax benefit (provision)
Income tax benefit (provision) represents the income tax benefit or expense associated with our operations based on the tax laws of the jurisdictions in which we operate. These foreign jurisdictions have different statutory tax rates thanthe United States . Our effective tax rates will vary depending on the relative proportion of foreign to domestic income, changes in the valuation of our deferred tax assets and liabilities, and changes in tax laws. 39 --------------------------------------------------------------------------------
Results of Operations
The following table sets forth our unaudited condensed consolidated statement of operations information for the periods presented:
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands) 2021 2020 2020
Revenue $ 170,713 $ 79,145 $ 39,990
Operating costs and expenses:
Cost of revenue 47,747 21,627 10,790
Selling and marketing expense 46,838 27,287 11,157
General and administrative expense 126,524 60,034 44,907
Product development expense 35,045 6,945 4,087
Depreciation and amortization expense 26,955 16,313 408
Total operating costs and expenses 283,109 132,206 71,349
Operating loss (112,396 ) (53,061 ) (31,359 )
Interest (expense) income (7,729 ) (4,539 ) 50
Other income (expense), net 6,991 612 (882 )
Loss before tax (113,134 ) (56,988 ) (32,191 )
Income tax benefit (provision) 436,576 1,179 (365 )
Net earnings (loss) 323,442 (55,809 ) (32,556 )
Net (loss) earnings attributable to
noncontrolling interests (18,348 ) (48 ) 1,917
Net earnings (loss) attributable to Bumble
Inc. shareholders / Buzz Holdings L.P.
owners $ 341,790 $ (55,761 ) $ (34,473 )
The following table sets forth our unaudited condensed consolidated statement of
operations information as a percentage of revenue for the periods presented:
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
2021 2020 2020
Revenue 100.0 % 100.0 % 100.0 %
Operating costs and expenses:
Cost of revenue 28.0 % 27.3 % 27.0 %
Selling and marketing expense 27.4 % 34.5 % 27.9 %
General and administrative expense 74.1 % 75.9 % 112.3 %
Product development expense 20.5 % 8.8 % 10.2 %
Depreciation and amortization expense 15.8 % 20.6 % 1.0 %
Total operating costs and expenses 165.8 % 167.0 % 178.4 %
Operating loss (65.8 )% (67.0 )% (78.4 )%
Interest (expense) income (4.5 )% (5.7 )% 0.1 %
Other income (expense), net 4.1 % 0.8 % (2.2 )%
Loss before tax (66.3 )% (72.0 )% (80.5 )%
Income tax benefit (provision) 255.7 % 1.5 % (0.9 )%
Net earnings (loss) 189.5 % (70.5 )% (81.4 )%
Net (loss) earnings attributable to
noncontrolling interests (10.7 )% (0.1 )% 4.8 %
Net earnings (loss) attributable to Bumble
Inc. shareholders / Buzz Holdings L.P.
owners 200.2 % (70.5 )% (86.2 )%
40
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The following table sets forth the stock-based compensation expense included in operating costs and expenses:
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands) 2021 2020 2020
Cost of revenue $ 1,607 $ - $ -
Selling and marketing expense 5,141 - 75
General and administrative expense 19,908 1,420 3,997
Product development expense 19,167 - 84
Total stock-based compensation expense
Comparison of the Three Months EndedMarch 31, 2021 (Successor), Period fromJanuary 29, 2020 toMarch 31, 2020 (Successor) and the Period fromJanuary 1, 2020 toJanuary 28, 2020 (Predecessor) Revenue Successor Predecessor Period from Period from January 29, January 1, Three Months through through Ended March 31, March 31, January 28, (in thousands) 2021 2020 2020 Bumble App$ 112,637 $ 46,652 $ 23,256 Badoo App and Other 58,076 32,493 16,734 Total Revenue$ 170,713 $ 79,145 $ 39,990 Revenue was$170.7 million for the three months endedMarch 31, 2021 ,$79.1 million for the period fromJanuary 29, 2020 toMarch 31, 2020 and$40.0 million for the period fromJanuary 1, 2020 toJanuary 28, 2020 . Revenue in the period fromJanuary 29, 2020 toMarch 31, 2020 was impacted by a reduction in deferred revenue of$9.2 million recorded in purchase accounting.
Bumble App Revenue was
Badoo App and Other Revenue was$58.1 million for the three months endedMarch 31, 2021 ,$32.5 million for period fromJanuary 29, 2020 toMarch 31, 2020 and$16.7 million for the period fromJanuary 1, 2020 toJanuary 28, 2020 . This change was primarily driven by a 19.1% increase in the number ofBadoo App and Other Paying Users to 1.5 million. In addition,Badoo App and Other Revenue includes advertising and partnership revenue of$2.6 million ,$3.2 million , and$1.2 million for the three months endedMarch 31, 2021 , the period fromJanuary 29, 2020 toMarch 31, 2020 and the period fromJanuary 1, 2020 toJanuary 28, 2020 , respectively. Cost of revenue Successor Predecessor Period from Period from Three Months January 29, January 1, Ended through through March 31, March 31, January 28, (in thousands, except percentages) 2021 2020 2020 Cost of revenue$ 47,747 $ 21,627 $ 10,790 Percentage of revenue 28.0 % 27.3 % 27.0 % Cost of revenue was$47.7 million for the three months endedMarch 31, 2021 ,$21.6 million for the period fromJanuary 29, 2020 toMarch 31, 2020 and$10.8 million for the period fromJanuary 1, 2020 toJanuary 28, 2020 . This change was primarily driven by the growth in in-app purchase fees due to increasing revenue. 41 --------------------------------------------------------------------------------
Selling and marketing expense
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
Selling and marketing expense
27.4 % 34.5 % 27.9 %
Selling and marketing expense was $46.8 million for the three months ended March
31, 2021 , $27.3 million for the period from January 29, 2020 to March 31, 2020
and $11.2 million for the period from January 1, 2020 to January 28, 2020 . This
change was primarily due to an increase in digital and social media marketing
costs, higher staff costs due to higher headcount and stock-based compensation,
which was $5.1 million in the three months ended March 31, 2021 .
General and administrative expense
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
General and administrative expense
74.1 % 75.9 % 112.3 %
General and administrative expense was $126.5 million for the three months ended
March 31, 2021 , $60.0 million for the period from January 29, 2020 to March 31,
2020 and $44.9 million for the period from January 1, 2020 to January 28, 2020 .
These were impacted by transaction costs of $13.5 million , $47.1 million and
$40.3 million in the three months ended March 31, 2021 , the period from
January 29, 2020 to March 31, 2020 and the period from January 1, 2020 to
January 28, 2020 , respectively. The increase was also driven by a $72.0 million
change in the fair value of the contingent earn-out liability in the three
months ended March 31, 2021 . In addition, the general and administrative expense
included stock-based compensation of $19.9 million , $1.4 million and $4.0
million (of which $3.8 million were in relation to the Sponsor Acquisition) in
the three months ended March 31, 2021 , the period from January 29, 2020 to
March 31, 2020 and the period from January 1, 2020 to January 28, 2020 ,
respectively. The remainder of the increase is mostly due to higher staff costs
mainly due to higher headcount.
Product development expense
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
Product development expense $ 35,045 $ 6,945 $ 4,087
Percentage of revenue 20.5 % 8.8 % 10.2 %
Product development expense was $35.0 million for the three months ended March
31, 2021 , $6.9 million for the period from January 29, 2020 to March 31, 2020
and $4.1 million for the period from January 1, 2020 to January 28, 2020 . The
change was primarily due to increased personnel-related expense as a result of
higher employee headcount in product development functions and stock-based
compensation which were $19.2 million , nil and $0.1 million in the three months
ended March 31, 2021 , the period from January 29, 2020 to March 31, 2020 and the
period from January 1, 2020 to January 28, 2020 , respectively.
42
--------------------------------------------------------------------------------Depreciation and amortization expense
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through 2020 through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
Depreciation and amortization expense $ 26,955 $ 16,313 $ 408
Percentage of revenue 15.8 % 20.6 % 1.0 %
The increase is due to the amortization of finite-lived intangible assets recognized in connection with the Sponsor Acquisition.
Interest (expense) income
Successor Predecessor
Period from
Period from January 1,
Three Months January 29, 2020
Ended through through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
Interest (expense) income $ (7,729 ) $ (4,539 ) $ 50
Percentage of revenue (4.5 )% (5.7 )% 0.1 %
The increase was primarily due to interest expense and amortization of deferred
financing fees on our long-term debt. We also raised an additional $275 million
of debt in October 2020 and as a result incurred higher interest expense in the
three months ended March 31, 2021 .
Other income (expense), net
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
Other income (expense), net $ 6,991 $ 612 $ (882 )
Percentage of revenue 4.1 % 0.8 % (2.2 )%
Other income (expense), net was $7.0 million for the three months ended March
31, 2021 , $0.6 million for the period from January 29, 2020 to March 31, 2020
and $(0.9) million for the period from January 1, 2020 to January 28, 2020 . The
change was primarily due to $2.9 million of fair value gain on interest rate
swaps during the three months ended March 31, 2021 and net foreign exchange
gains (losses) of $3.8 million in the three months ended March 31, 2021 , $0.6
million in the period from January 29, 2020 to March 31, 2020 and $(0.5) million
in the period from January 1, 2020 to January 28, 2020 .
Income tax benefit (provision)
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through through
March 31, March 31, January 28,
(in thousands, except percentages) 2021 2020 2020
Income tax benefit (provision) $ 436,576 $ 1,179 $ (365 )
Effective tax rate (385.9 )% (2.1 )% 1.1 %
43
-------------------------------------------------------------------------------- Income tax benefit (provision) was$436.6 million for the three months endedMarch 31, 2021 ,$1.2 million for the period fromJanuary 29, 2020 toMarch 31, 2020 and$(0.4) million for the period fromJanuary 1, 2020 toJanuary 28, 2020 . The tax benefit of$436.6 million recorded in the three months endedMarch 31, 2021 includes a$441.5 million tax benefit related to the reversal of a net deferred tax liability due to a restructuring of our international operations and a$1.3 million tax provision associated with prior period items. In addition, the tax benefit for the three months endedMarch 31, 2021 reflects the impact of our assessment that we will not be able to record the benefit of certain current year deferred tax assets for which a valuation allowance is expected.
Non-GAAP Financial Measures
We report our financial results in accordance with GAAP, however, management believes that certain non-GAAP financial measures provide users of our financial information with useful supplemental information that enables a better comparison of our performance across periods. We believe Adjusted EBITDA provides visibility to the underlying continuing operating performance by excluding the impact of certain expenses, including income tax (benefit) provision, interest expense (income), depreciation and amortization, stock-based compensation expense, foreign exchange (gain) loss, changes in fair value of contingent earn-out liability, interest rate swaps and external investments, transaction costs and one-time litigation costs, as management does not believe these expenses are representative of our core earnings. We also provide Adjusted EBITDA Margin, which is calculated as Adjusted EBITDA divided by revenue. In addition to Adjusted EBITDA and Adjusted EBITDA Margin, we believe Free Cash Flow and Free Cash Flow Conversion provide useful information regarding how cash provided by operating activities compares to the capital expenditures required to maintain and grow our business, and our available liquidity, after funding such capital expenditures, to service our debt, fund strategic initiatives and strengthen our balance sheet, as well as our ability to convert our earnings to cash. Additionally, we believe such metrics are widely used by investors, securities analysis, ratings agencies and other parties in evaluating liquidity and debt-service capabilities. We calculate Free Cash Flow and Free Cash Flow Conversion using methodologies that we believe can provide useful supplemental information to help investors better understand underlying trends in our business. Our non-GAAP financial measures may not be comparable to similarly titled measures used by other companies, have limitations as analytical tools and should not be considered in isolation, or as substitutes for analysis of our operating results as reported under GAAP. Additionally, we do not consider our non-GAAP financial measures as superior to, or a substitute for, the equivalent measures calculated and presented in accordance with GAAP. Some of the limitations are:
• Adjusted EBITDA and Adjusted EBITDA Margin exclude the recurring, non-cash
expenses of depreciation and amortization of property and equipment and
definite-lived intangible assets and, although these are non-cash
expenses, the assets being depreciated and amortized may have to be
replaced in the future;
• Adjusted EBITDA and Adjusted EBITDA Margin do not reflect changes in, or
cash requirements for, our working capital needs;
• Adjusted EBITDA and Adjusted EBITDA Margin exclude the non-cash expense of
stock-based compensation, which has been, and will continue to be for the
foreseeable future, an important part of how we attract and retain our
employees and a significant recurring expense in our business;
• Adjusted EBITDA and Adjusted EBITDA Margin do not reflect the interest
(income) expense or the cash requirements to service interest or principal
payments on our indebtedness, and Free Cash Flow does not reflect the cash
requirements to service principal payments on our indebtedness;• Adjusted EBITDA and Adjusted EBITDA Margin do not reflect income tax
(benefit) provision we are required to make; and
• Free Cash Flow and Free Cash Flow Conversion do not represent our residual
cash flow available for discretionary purposes and does not reflect our
future contractual commitments.
Adjusted EBITDA is not a liquidity measure and should not be considered as
discretionary cash available to us to reinvest in the growth of our business or
to distribute to stockholders or as a measure of cash that will be available to
us to meet our obligations.
To properly and prudently evaluate our business, we encourage you to review the
financial statements included elsewhere in this report, and not rely on a single
financial measure to evaluate our business. We also strongly urge you to review
the reconciliation of net earnings (loss) to Adjusted EBITDA, the computation of
Adjusted EBITDA Margin as compared to net earnings (loss) margin which is net
earnings (loss) as a percentage of revenue, the reconciliation of net cash used
in operating activities to Free Cash Flow, and the computation of Free Cash Flow
Conversion as compared to Operating Cash Flow Conversion, which is net cash used
in operating activities as a percentage of net earnings (loss) in each case set
forth below.
44
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Adjusted EBITDA and Adjusted EBITDA Margin
We define Adjusted EBITDA as net earnings (loss) excluding income tax (benefit)
provision, interest (income) expense, depreciation and amortization, stock-based
compensation expense, foreign exchange loss (gain), changes in fair value of
contingent earn-out liability, interest rate swaps and external investments,
transaction costs and one-time litigation costs. Adjusted EBITDA
Margin represents Adjusted EBITDA as a percentage of revenue. The following
table reconciles net earnings (loss) and net earnings (loss) margin, the most
comparable GAAP financial measures, to Adjusted EBITDA and Adjusted EBITDA
Margin for the periods presented:
Successor Predecessor
Three Months Period from Period from
Ended January 29, January 1,
March 31, through 2020 through
2021 March 31, January 28,
(in thousands, except percentages) 2020 2020
Net earnings (loss) $ 323,442 $ (55,809 ) $ (32,556 )
Add back:
Income tax (benefit) provision (436,576 ) (1,179 ) 365
Interest expense (income) 7,729 4,539 (50 )
Depreciation and amortization 26,955 16,313 408
Stock-based compensation expense 45,823 1,420 336
Litigation costs, net of insurance proceeds(1) 234 1,000 -
Foreign exchange (gain) loss (2) (3,843 ) (647 ) 523
Changes in fair value of interest rate
swaps(3) (2,944 ) - -
Transaction costs(4) 13,502 47,097 40,345
Changes in fair value of contingent earn-out
liability 71,954 - -
Changes in fair value of external investments (196 ) - -
Adjusted EBITDA $ 46,080 $ 12,734 $ 9,371
Net earnings (loss) margin(5) 189.5 % (70.5 )% (81.4 )%
Adjusted EBITDA Margin 27.0 % 16.1 % 23.4 %
(1) Represents certain litigation costs and insurance proceeds associated with
pending litigations or settlements of litigation.
(2) Represents foreign exchange (gain) loss due to foreign currency transactions.
(3) Represents fair value gain on interest rate swaps.
(4) Represents transaction costs and professional service fees related to the
Sponsor Acquisition and the IPO.
(5) Includes a
tax liability due to a restructuring of the Company's international
operations.
Free Cash Flow and Free Cash Flow Conversion
We define Free Cash Flow as net cash (used in) provided by operating activities
less capital expenditures. Free Cash Flow Conversion represents Free Cash Flow
as a percentage of Adjusted EBITDA. The following table reconciles net cash used
in operating activities, the most comparable GAAP financial measure, to Free
Cash Flow for the periods presented:
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through 2020
March 31, March 31, through
2021 2020 January 28,
(in thousands, except percentages) 2020
Net cash used in operating activities $ (45,582 ) $ (57,602 ) $ (3,306 )
Less:
Capital expenditures (2,712 ) (921 ) (1,045 )
Free Cash Flow $ (48,294 ) $ (58,523 ) $ (4,351 )
Operating Cash Flow Conversion (14.1 )% 103.2 % 10.2 %
Free Cash Flow Conversion (104.8 )% (459.6 )% (46.4 )%
45
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Liquidity and Capital Resources
Overview
The Company's principal sources of liquidity are our cash and cash equivalents and cash generated from operations. Our primary uses of liquidity are operating expenses and capital expenditures. As ofMarch 31, 2021 , we had$246.0 million of cash and cash equivalents, an increase of$118.0 million fromDecember 31, 2020 . In connection with our IPO, we used the proceeds (net of underwriting discounts) from the issuance of 9.0 million shares of Class A common stock ($369.6 million ) in the IPO to repay outstanding indebtedness under our Incremental Term Loan Facility totaling$200.0 million in aggregate principal amount and allocated$169.9 million to be used for general corporate purposes, to bear all of the expenses of the IPO and we expect that our future principal uses of cash will also include funding our debt obligations and paying income taxes and obligations under our tax receivable agreement. Based on current conditions, we believe that we have sufficient financial resources to fund our activities and execute our business plans during the next twelve months.
Cash Flow Information
The following table summarizes our unaudited condensed consolidated cash flow information for the periods presented:
Successor Predecessor
Period from Period from
Three Months January 29, January 1,
Ended through 2020 through
March 31, March 31, January 28,
(in thousands) 2021 2020 2020
Net cash (used in) provided by:
Operating activities $ (45,582 ) $ (57,602 ) $ (3,306 )
Investing activities (2,743 ) (2,802,256 ) (1,029 )
Financing activities 166,717 2,934,881 -
Operating activities
Net cash used in operating activities was $45.6 million for the three months
ended March 31, 2021 , $57.6 million for period from January 29, 2020 to
March 31, 2020 and $3.3 million for the period from January 1, 2020 to
January 28, 2020 . This includes adjustments to net earnings (loss) for the three
months ended March 31, 2021 , for the period from January 29, 2020 to March 30,
2020 and for the period from January 1, 2020 to January 28, 2020 related to:
deferred income tax of $(441.7) million , $(0.5) million and $0.0 million
respectively; change in fair value of deferred contingent consideration of $71.9
million , nil and nil respectively; stock-based compensation of $45.8 million ;
$1.4 million and $4.2 million respectively; and depreciation and amortization of
$27.0 million , $16.3 million and $0.4 million respectively.
The changes in assets and liabilities for the three months ended March 31, 2021 ,
for the period from January 29, 2020 to March 30, 2020 and for the period from
January 1, 2020 to January 28, 2020 consist primarily of: changes in legal
liabilities of $(30.2) million ; $(2.6) million and $(0.5) million respectively;
and changes in accounts receivables of $(21.1) million ; $2.7 million and $(17.6)
million respectively driven by timing of cash receipts, primarily related to
Apple.
Investing activities
Net cash used in investing activities was $2.7 million in three months ended
March 31, 2021 , $2,802.3 million for the period from January 29, 2020 to March
31, 2020 and $1.0 million for the period from January 1, 2020 to January 28,
2020 . The change was primarily due to acquisition of the business (net of cash
acquired) of $2,801.3 million in the period from January 29, 2020 to March 31,
2020 .
Financing activities
Net cash provided by financing activities was $166.7 million in three months
ended March 31, 2021 , $2,934.9 million for the period from January 29, 2020 to
March 31, 2020 and nil for the period from January 1, 2020 to January 28, 2020 .
In the three months ended March 31, 2021 , the Company received net proceeds of
$2,361.2 million after deducting underwriting discounts and commissions, of
which $1,991.6 million was used to redeem shares of Class A common stock and
purchase Common Units from our Sponsor and $200 million was used to repay a
portion of the outstanding indebtedness under our Incremental Term Loan
Facility. In the period from January 29, 2020 to March 31, 2020 , the Company
received cash of $2,334.2 million in relation to limited partners' interest, net
proceeds from external debt of $558.7 million and proceeds from the repayment of
loans to related companies of $41.9 million .
46
--------------------------------------------------------------------------------Indebtedness
Senior Secured Credit Facilities
In connection with the Sponsor Acquisition, inJanuary 2020 , we entered into the Initial Term Loan Facility in an original aggregate principal amount of$575.0 million and the Revolving Credit Facility in an aggregate principal amount of up to$50.0 million . InOctober 2020 , we entered into the Incremental Term Loan Facility in an original aggregate principal amount of$275.0 million . The Incremental Term Loan Facility provides for additional senior secured term loans with substantially identical terms as the Initial Term Loan Facility (other than the applicable margin). The borrower under the Senior Secured Credit Facilities is a wholly owned subsidiary ofBumble Inc. ,Buzz Finco L.L.C. (the "Borrower"). The Senior Secured Credit Facilities contain affirmative and negative covenants and customary events of default. Borrowings under the Senior Secured Credit Facilities bear interest at a rate equal to, at the Borrower's option, either (i) LIBOR for the relevant interest period, adjusted for statutory reserve requirements (subject to a floor of 0.0% on the Initial Term Loan and 0.50% on the Incremental Term Loan Facility), plus an applicable margin or (ii) a base rate equal to the highest of (a) the rate of interest in effect as last quoted by theWall Street Journal as the "Prime Rate" inthe United States , (b) the federal funds effective rate plus 0.50% and (c) adjusted LIBOR for an interest period of one month plus 1.00% (subject to a floor of 0.00% per annum), in each case, plus an applicable margin. The applicable margin for loans under the Revolving Credit Facility is subject to adjustment based upon the consolidated first lien net leverage ratio of the Borrower and its restricted subsidiaries and is subject to reduction after the consummation of our IPO. In addition to paying interest on the outstanding principal under the Senior Secured Credit Facilities, the Borrower is required to pay a commitment fee of 0.50% per annum (which is subject to a decrease to 0.375% per annum based upon the consolidated first lien net leverage ratio of the Borrower and its restricted subsidiaries) to the lenders under the Revolving Credit Facility in respect of the unutilized commitments thereunder. The Borrower must also pay customary letter of credit fees and an annual administrative agency fee. The Initial Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount of the Initial Term Loan Facility outstanding as of the date of the closing of the Initial Term Loan Facility, with the balance being payable at maturity onJanuary 29, 2027 . The Incremental Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount of the Incremental Term Loan Facility outstanding as of the date of the closing of the Incremental Term Loan Facility, with the balance being payable at maturity onJanuary 29, 2027 . Principal amounts outstanding under the Revolving Credit Facility are due and payable in full at maturity onJanuary 29, 2025 . OnMarch 31, 2021 , we used a portion of the net proceeds from the IPO to repay$200 million aggregate principal amount of our outstanding indebtedness under our Incremental Term Loan Facility.
Contractual Obligations and Contingencies
The following table summarizes our contractual obligations as ofMarch 31, 2021 : Payments due by period Less than 1 to 3 3 to 5 More than (in thousands) 1 year years years 5 years Total Long-term debt$ 13,158 $ 17,000 $ 17,000 $ 600,375 $ 647,533 Litigation 14,000 - - - 14,000 Operating leases 4,698 5,976 - - 10,674 Other 2,958 3,250 2,663 - 8,871 Total$ 34,814 $ 26,226 $ 19,663 $ 600,375 $ 681,078 The payments that we may be required to make under the tax receivable agreement to the pre-IPO owners may be significant and are not reflected in the contractual obligations table set forth above as they are dependent upon future taxable income. Assuming no material changes in the relevant tax law, and that we earn sufficient taxable income to realize all tax benefits that are subject to the tax receivable agreement, we expect future payments under the tax receivable agreement related to the Offering Transactions to aggregate to$527.8 million of which we have recorded a liability of$356.8 million . We expect such payments over the next 15 years to range from approximately$9.5 million to$51.0 million per year and decline thereafter. In determining these estimated future payments, we have given retrospective effect to certain exchanges of Common Units for Class A shares that occurred after the IPO but were 47 --------------------------------------------------------------------------------
contemplated to have occurred pursuant to the Blocker Restructuring. The foregoing numbers are merely estimates, and the actual payments could differ materially. See "- Tax Receivable Agreement."
In connection with the Sponsor Acquisition inJanuary 2020 , we entered into a contingent consideration arrangement, consisting of an earn-out payment to the former shareholders ofWorldwide Vision Limited of up to$150 million . The timing and amount of such payment, that we may be required to make, is not reflected in the contractual obligations table set forth above as it is dependent upon our Sponsor achieving a specified return on invested capital. See Note 5, Business Combination, for additional information.
Off-Balance Sheet Arrangements
Other than the items described above, we have no significant off-balance sheet arrangements.
Critical Accounting Policies and Estimates
Except as described in Note 2, Summary of Selected Significant Accounting
Policies, there have been no material changes to our critical accounting
policies or in the underlying accounting assumptions and estimates used in such
policies as reported in our Annual Report on Form 10-K for the year ended
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