Fitch Ratings has affirmed the Long-Term Issuer Default Rating (IDR) of
The upgrade resolves the Under Criteria Observation (UCO) designation placed on
The Rating Outlook has been revised to Stable from Negative.
Key Rating Drivers
IPO and Organic Growth Drive Deleveraging: Bumble's leverage has quickly declined from a peak of 5.6x in Oct-2020 to 3.4x in the LTM period ended
Industry Growth Supported by Secular Tailwinds: Fitch expects the online dating industry, and freemium dating applications in particular, to experience strong user and revenue growth over the rating horizon. Fitch believes growth will be supported by increasing international smartphone penetration, declining marriage rates, lessening stigmas around online dating and an increasing proportion of Generation Z being eligible to use web-based dating services. Fitch believes Bumble is well positioned to benefit from this secular trend.
Bumble's revenue growth trajectory was not significantly affected by coronavirus-related restrictions on social gatherings, and the business has exhibited strong sequential revenue growth in each month since
Limited Product Diversification: Bumble's portfolio consists of two main platforms, Bumble and Badoo, which represented 65% and 35% of revenue, respectively, in the LTM period ended
Significant Level of Competition: Bumble competes in the crowded and competitive online dating industry. Bumble's main competitor is
Fitch believes
Robust Cash Flow Generation: Fitch expects Bumble to generate strong FCF margins over the rating horizon. Cash flow generation will be supported by a strong EBITDA margin profile, limited working capital requirements, and low levels of capital intensity. Fitch believes strong FCF generation provides management with significant financial flexibility to pursue strategic investments with internally generated resources. However, consistently allocating FCF toward shareholder distributions will limit financial flexibility.
Concentrated Voting Power:
Derivation Summary
Bumble's 'BB-' IDR is supported by Bumble's competitive positioning as a safe and female-friendly dating application, relatively conservative leverage profile, strong FCF generation and Fitch's expectation for the company to achieve sustained strong revenue growth supported by a number of secular tailwinds. The credit profile's strengths are offset by material discretionary consumer spending exposure, limited product diversification and significant sector competition. The 'RR1' Recovery Rating on the senior secured debt reflects Fitch's expectation for a superior recovery based on the company's strong underlying cash flow generation, profitability and brand value.
Bumble builds and operates dating and social networking mobile applications, which most notably include Bumble and Badoo. Bumble does not have any direct peers within Fitch's corporates universe. Fitch believes Bumble's operational, financial and credit protection metrics position it well in the 'BB-' rating category compared with Fitch's rated TMT universe.
Key Assumptions
Fitch's Key Assumptions Within the Rating Case for the Issuer
Consolidated revenue expected to grow at a double-digit CAGR over the rating horizon, driven by both paying user growth and ARPPU growth, reflecting the strong secular tailwinds in the online dating industry and the company's new user monetization initiatives;
Fitch assumes a majority of revenue growth will be derived from Bumble subscription and transaction growth, as a majority of marketing spend is allocated toward Bumble user acquisition;
Fitch does not assume any acquisitions over the forecast period;
Gross profit margins assumed to be stable over the forecast horizon;
Fitch assumes EBITDA margins range between 27%-29%
Fitch assumes stable capital intensity over the rating horizon;
Fitch assumes Bumble repurchases
RATING SENSITIVITIES
Factors that could, individually or collectively, lead to positive rating action/upgrade:
Bumble's consolidated revenue growth materially exceeding industry growth;
Total debt with equity credit/operating EBITDA sustained below 3.0x;
Sustained double-digit FCF margins.
Factors that could, individually or collectively, lead to negative rating action/downgrade:
Debt funded acquisitions or shareholder returns causing total debt with equity credit/operating EBITDA to exceed 4.0x without a credible plan for deleveraging;
Sustained low single-digit FCF margins.
Best/Worst Case Rating Scenario
International scale credit ratings of Non-Financial Corporate issuers have a best-case rating upgrade scenario (defined as the 99th percentile of rating transitions, measured in a positive direction) of three notches over a three-year rating horizon; and a worst-case rating downgrade scenario (defined as the 99th percentile of rating transitions, measured in a negative direction) of four notches over three years. The complete span of best- and worst-case scenario credit ratings for all rating categories ranges from '
Liquidity and Debt Structure
Strong Liquidity Position: As of
Bumble's debt structure is comprised of a
Issuer Profile
REFERENCES FOR SUBSTANTIALLY MATERIAL SOURCE CITED AS KEY DRIVER OF RATING
The principal sources of information used in the analysis are described in the Applicable Criteria.
ESG Considerations
Bumble has an ESG Relevance Score of '4' for social impacts due to Bumble's position as a female-friendly dating application seeking to mitigate harassment or abusive language frequently experienced by women on dating applications, which has a positive impact on the credit profile, and is relevant to the ratings in conjunction with other factors. Fitch believes that Bumble's female friendly policies give Bumble a competitive advantage in the online dating industry, which bolsters the company's strong market position and supports user retention rates.
Bumble has an ESG Relevance Score of '4' for governance structure due to the sponsor and founder's collective control of all operational and financing decisions, which has a negative impact on the credit profile, and is relevant to the ratings in conjunction with other factors.
Unless otherwise disclosed in this section, the highest level of ESG credit relevance is a score of 3 - ESG issues are credit neutral or have only a minimal credit impact on the entity, either due to their nature or the way in which they are being managed by the entity. For more information on Fitch's ESG Relevance Scores, visit www.fitchratings.com/esg.
RATING ACTIONSENTITY/DEBT RATING RECOVERY PRIOR
Bumble Inc. LT IDR BB- New Rating
Buzz Finco L.L.C. LT IDR BB- Affirmed BB-
senior secured
LT BB+ Upgrade RR1 BB
VIEW ADDITIONAL RATING DETAILS
Additional information is available on www.fitchratings.com
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