Bumble Inc.: Form 10-Q for the period ended Jun 30, 2024

You should read the following discussion and analysis of the financial condition and results of operations of Bumble Inc. 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” herein and Part I, “Item 1A—Risk Factors" in our 2023 Form 10-K.

Overview

We provide online dating and social networking applications through free, subscription and in-app purchases of products servicing North America, Europe and various other countries around the world. As of June 30, 2024, Bumble operates five apps, Bumble, Bumble For Friends, Badoo, Fruitz and Official. Bumble app, launched in 2014, is one of the first dating apps built with women at the center, where women make the first move. Bumble app is a leader in the online dating sector across several countries, including the United States, the United Kingdom, Australia and Canada. Badoo app, launched in 2006, was one of the pioneers of web and mobile free-to-use dating products. Badoo app’s focus is to make finding meaningful connections easy, fun and accessible for a mainstream global audience. Badoo app continues to be a market leader in Europe and Latin America. In January 2022, we acquired Fruitz, an intentions-driven dating app focused on Gen Z, operating in EMEA and Canada. In April 2023, we acquired Official, an app that is intended to help couples build healthy and lasting habits in their romantic relationships. Building on the BFF mode in Bumble app, in July 2023 we officially launched a standalone Bumble For Friends app. Bumble For Friends app is a friendship app where people in all stages of life can meet people nearby and create meaningful platonic connections.

Quarter ended June 30, 2024 Consolidated Results

For the three months ended June 30, 2024 and 2023, we generated:

• Total revenue of $268.6 million and $259.7 million, respectively;
• Bumble App Revenue of $218.0 million and $208.0 million, respectively;
• Badoo App and Other Revenue of $50.6 million and $51.8 million, respectively;
• Net earnings (loss) of $37.7 million and $9.3 million, respectively, representing net earnings (loss) margins of 14.0%, and 3.6%, respectively; and
• Adjusted EBITDA of $75.0 million and $67.3 million, respectively, representing Adjusted EBITDA margins of 27.9%, and 25.9%, respectively.

Year-to-Date ended June 30, 2024 Consolidated Results

For the six months ended June 30, 2024 and 2023, we generated:

• Total revenue of $536.4 million and $502.7 million, respectively;
• Bumble App Revenue of $433.7 million and $402.3 million, respectively;
• Badoo App and Other Revenue of $102.7 million and $100.4 million, respectively;
• Net earnings (loss) of $71.6 million and $7.0 million, respectively, representing net earnings (loss) margins of 13.3% and 1.4%, respectively; and
• Adjusted EBITDA of $149.0 million and $126.6 million, respectively, representing Adjusted EBITDA margins of 27.8% and 25.2%, respectively.
• Net cash provided by operating activities of $35.3 million and $56.1 million, respectively, and operating cash flow conversion of 49.4% and 799.1%, respectively; and
• Free cash flow of $30.8 million and $46.9 million, respectively, representing free cash flow conversion of 20.7% and 37.0%, 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.”

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.

The following metrics were calculated excluding paying users and revenue generated from Official, advertising and partnerships or affiliates and, for periods prior to the fourth quarter of 2023, excluding paying users and revenue generated from Fruitz. Beginning in the fourth quarter of 2023, paying users and revenue generated from Fruitz are included in our key operating metrics. Prior period information and key operating metrics have not been recast to include paying users and revenue generated from Fruitz.

(In thousands, except ARPPU)

(In thousands, except per share data and percentages)

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, net, depreciation and amortization expense, stock-based compensation expense, employer costs related to stock-based compensation, foreign exchange (gain) loss, changes in fair value of contingent earn-out liability, interest rate swaps and investments in equity securities, transaction and other costs, litigation costs net of insurance reimbursements that arise outside of the ordinary course of business, tax receivable agreement liability remeasurement (benefit) expense, impairment loss, and costs associated with our Restructuring Plan. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue.
• Free cash flow. We define free cash flow as net cash provided by (used in) operating activities less capital expenditures. Free cash flow conversion represents free cash flow as a percentage of Adjusted EBITDA.

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 provided by (used in) operating activities to free cash flow.

Macroeconomic Conditions

The prevailing global economic climate, the conflicts in Eastern Europe and the Middle East, and other macroeconomic conditions, including but not limited to slower growth or economic recession, changes to fiscal and monetary policy, and fluctuations in foreign currency exchange rates have impacted and may continue to impact our business as consumers face greater pressure on disposable income. We continuously monitor the direct and indirect impacts of these circumstances on our business and financial results.

For additional information, see “Risk Factors—General Risk Factors—We are exposed to changes in the global macroeconomic environment beyond our control, which may adversely affect consumer discretionary spending, demand for our products and services, our expenses, and our ability to execute strategic plans.” in Part I, “Item 1A—Risk Factors” of our 2023 Form 10-K.

Factors Affecting the Comparability of Our Results of Operations

As a result of a number of factors, our historical results of operations may not be comparable from period to period or going forward. Set forth below is a brief discussion of the key factors impacting the comparability of our results of operations.

Secondary Offering

On March 8, 2023, the Company completed a secondary offering of 13.75 million shares of Class A common stock on behalf of certain selling stockholders affiliated with Blackstone (the “Blackstone Selling Stockholders”) and the Founder at a price of $22.80 per share. This transaction resulted in the issuance of 7.2 million shares of Class A common stock for the period ended March 31, 2023, which were issued in exchange for Common Units held by the selling stockholders.

Bumble did not sell any shares of Class A common stock in these offerings and did not receive any of the proceeds from the sales. Bumble paid the costs associated with the sales of shares by the selling stockholders, net of the underwriting discounts.

Share Repurchase Program

In May 2023, we announced that our Board of Directors approved a share repurchase program of up to $150.0 million of our outstanding Class A common stock with repurchases under the program to be made on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or other means, including privately negotiated transactions. We announced increases in the share repurchase program authorized amount from $150.0 million to $300.0 million in November 2023 and from $300.0 million to $450.0 million in May 2024. There were no share repurchases during the three months ended June 30, 2024. During the six months ended June 30, 2024, share repurchases included 5.3 million shares of Class A common stock and 2.0 million Common Units for $84.4 million, excluding excise tax obligations. During the three and six months ended June 30, 2023, share repurchases included 1.3 million shares of Class A common stock for $20.9 million. As of June 30, 2024, a total of $208.7 million remains available for repurchase under the repurchase program.

For additional information, see Note 2, Summary of Selected Significant Accounting Policies —Share Repurchase Program and Note 12, Related Party Transactions — Share Repurchase, to our unaudited condensed consolidated financial statements included in Part I, “Item 1 – Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q.

Reorganization Transactions

Prior to the completion of the IPO, we undertook certain reorganization transactions (the “Reorganization Transactions”) such that Bumble Inc. is now a holding company, and its sole material asset is a controlling equity interest in Bumble Holdings. As the general partner of Bumble Holdings, Bumble Inc. now operates and controls all of the business and affairs of Bumble Holdings, has the obligation to absorb losses and receive benefits from Bumble Holdings and, through Bumble Holdings and its subsidiaries, conducts our business. Bumble Inc. will consolidate Bumble 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 sheets and statements of operations.

Bumble Inc. is a corporation for U.S. federal and state income tax purposes. Bumble Inc.’s accounting predecessor, Bumble Holdings is and has been since the Sponsor Acquisition, treated as a flow-through entity for U.S. federal income tax purposes, and as such, has generally not been subject to U.S. federal income tax at the entity level. Following our IPO, Bumble Inc. pays U.S. federal and state income taxes as a corporation on its share of Bumble Holdings’ taxable income.

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 by the Company to such pre-IPO owners of 85% of the benefits that the Company realizes, or is deemed to realize, as a result of the Company’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 of Bumble 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. The payments under the tax receivable agreement are not conditioned upon continued ownership of the Company by the pre-IPO owners.

For additional information, see “Risk Factors—Bumble Inc. will be required to pay certain of our pre-IPO owners for most of the benefits relating to tax depreciation or amortization deductions that we may claim as a result of Bumble Inc.’s allocable share of existing tax basis acquired in the IPO, Bumble Inc.’s increase in its allocable share of existing tax basis and anticipated tax basis adjustments we receive in connection with sales or exchanges of Common Units (including Common Units issued upon conversion of vested Incentive Units) in connection with or after the IPO and our utilization of certain tax attributes of the Blocker Companies.” and “Risk Factors—In certain cases, payments under the tax receivable agreement may be accelerated and/or significantly exceed the actual benefits Bumble Inc. realizes in respect of the tax attributes subject to the tax receivable agreement.” in each case, in Part I, “Item 1A—Risk Factors” of our 2023 Form 10-K.

For additional information, see Note 4, Payable to Related Parties Pursuant to a Tax Receivable Agreement, to our unaudited condensed consolidated financial statements included in Part I, “Item 1 – Financial Statements (Unaudited)” of this Quarterly Report on Form 10-Q.

We have determined that it is more likely than not that we will be unable to realize tax benefits related to certain basis adjustments and acquired net operating losses 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 of June 30, 2024. At the time of the Sponsor Acquisition, the assets and liabilities of Bumble Holdings were adjusted to fair value on the closing date of the business combination for both financial reporting and income tax purposes. As a result of the IPO, we inherited certain tax benefits associated with this stepped-up basis (“Common Basis”) created when certain pre-IPO owners acquired their interests in Bumble Holdings in the Sponsor Acquisition. This Common Basis entitles us to the depreciation and amortization deductions previously allocable to the pre-IPO owners. Based on current projections, we anticipate having sufficient taxable income to be able to realize the benefit of this Common Basis and have recorded a tax receivable agreement liability to related parties of $419.3 million related to these benefits as of June 30, 2024. To the extent that we determine that we are able to realize the tax benefits associated with the basis adjustments and net operating losses, we would record an additional liability of $290.5 million for a total liability of $709.8 million. If, in the future, we are not able to utilize the Common Basis, we would record a reduction in the tax receivable agreement liability to related parties that would result in a benefit recorded within our consolidated statements of operations. During the six months ended June 30, 2024, our tax receivable agreement liability decreased by a net $10.9 million due to the following: (1) a $23.1 million decrease from tax receivable agreement payments made during the first quarter of 2024, and (2) an offsetting increase of $12.2 million, primarily due to the effects of the repurchase of Common Units in Bumble Holdings from Blackstone entities and the common stock repurchases completed in the first quarter of 2024.

Restructuring Plan

On February 27, 2024, the Company announced that it adopted a restructuring plan (the “Restructuring Plan”) to reduce its global workforce by approximately 350 roles to better align its operating model with future strategic priorities and to drive stronger operating leverage. The Restructuring Plan is expected to be completed in the third quarter of 2024, and we expect to incur approximately $20.0 million to $22.0 million of total non-recurring charges through the third quarter of 2024, consisting primarily of employee severance, benefits, and related charges for impacted employees. For the three and six months ended June 30, 2024, we incurred non-recurring restructuring charges of $3.2 million and $19.8 million, respectively.

For additional information, see Note 6, Restructuring Charges, 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 the Bumble, Bumble For Friends, Badoo, Fruitz and Official 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 and estimated breakage revenue associated with unused in-app purchases.

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 the Apple App Store and Google Play Store. Purchases on Android, mobile web and desktop may 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.

Cost of revenue also includes data center expenses such as rent, power and bandwidth for running servers, cloud hosting costs, employee compensation (including stock-based compensation) and other employee related costs, impairment of capitalized aggregator costs associated with breakage revenue and restructuring charges. 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, restructuring charges, 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, impairment losses, changes in fair value of contingent earn-out liability, expenses associated with facilities, information technology, external professional services, legal costs, settlement of legal claims and accruals for future legal obligations that are deemed probable and estimable, restructuring charges 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, as well as restructuring charges.

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 income (expense), net

Interest income (expense), net consists of interest income received on money market funds and related party loans receivables and interest expense incurred in connection with our long-term debt.

Other income (expense), net

Other income (expense), net consists of insurance reimbursement proceeds, impacts from foreign exchange transactions, tax receivable agreement liability remeasurement (benefit) expense, loss on debt extinguishment, fair value changes in derivatives, sub-lease income and investments in equity securities.

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 than the 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.

Results of Operations

The following table sets forth our unaudited condensed consolidated statement of operations information for the periods presented:

(In thousands)

The following table sets forth our unaudited condensed consolidated statement of operations information as a percentage of revenue for the periods presented:

33

The following table sets forth the stock-based compensation expense, included in operating costs and expenses:

(In thousands)

During the three and six months ended June 30, 2024, stock-based compensation expense decreased due to forfeitures for terminations including the reduction in force related to the Restructuring Plan.

Comparison of the Three and Six Months Ended June 30, 2024 and 2023

Revenue

(In thousands)

Total Revenue was $268.6 million for the three months ended June 30, 2024, compared to $259.7 million for the same period in 2023. The increase was primarily driven by growth in Total Paying Users, partially offset by a decline in Total Average Revenue per Paying User and unfavorable fluctuations in foreign currency exchange rates.

Bumble App Revenue was $218.0 million for the three months ended June 30, 2024, compared to $208.0 million for the same period in 2023. This increase was primarily driven by a 14.6% increase in Bumble App Paying Users to 2.8 million, partially offset by an 8.6% decline in Bumble App ARPPU to $25.79 and unfavorable fluctuations in foreign currency exchange rates.

Badoo App and Other Revenue was $50.6 million for the three months ended June 30, 2024, compared to $51.8 million for the same period in 2023. This decrease was primarily driven by a decline in Badoo App and Other ARPPU to $11.93, partially offset by an increase in Badoo App and Other Paying Users to 1.3 million. We began to include paying users and revenue generated from Fruitz in our key operating metrics in the fourth quarter of 2023 and prior period key operating metrics have not been recast.

Total Revenue was $536.4 million for the six months ended June 30, 2024, compared to $502.7 million for the same period in 2023. The increase was primarily driven by growth in Total Paying Users, partially offset by a decline in Total Average Revenue per Paying User and unfavorable fluctuations in foreign currency exchange rates.

Bumble App Revenue was $433.7 million for the six months ended June 30, 2024, compared to $402.3 million for the same period in 2023. This increase was primarily driven by a 16.1% increase in Bumble App Paying Users to 2.8 million, partially offset by a 7.2% decline in Bumble App ARPPU to $26.06 and unfavorable fluctuations in foreign currency exchange rates.

Badoo App and Other Revenue was $102.7 million for the six months ended June 30, 2024, compared to $100.4 million for the same period in 2023. This increase was primarily driven by an increase in Badoo App and Other Paying Users to 1.3 million, partially offset by a decline in Badoo App and Other ARPPU to $12.14. We began to include paying users and revenue generated from Fruitz in our key operating metrics in the fourth quarter of 2023 and prior period key operating metrics have not been recast.

Cost of revenue

(In thousands, except percentages)

Cost of revenue for the three months ended June 30, 2024 increased by $3.3 million, or 4.3%, as compared to the same period in 2023. Cost of revenue for the six months ended June 30, 2024 increased by $14.0 million, or 9.5%, as compared to the same period in 2023. The increase in cost of revenue for each of the three and six months ended June 30, 2024 was driven primarily by growth in in-app purchase fees due to increasing revenue.

As a percentage of revenue, cost of revenue increased for each of the three and six months ended June 30, 2024, as compared to the same periods in 2023, primarily due to the adoption of Google Play and user choice billing in many of our markets and to a lesser extent an increase in cloud hosting and subscription costs, partially offset by a decrease in stock-based compensation due to forfeitures. For the six months ended June 30, 2024, as compared to the same period in 2023, the change was also driven by an increase in personnel-related costs associated with our Restructuring Plan.

Selling and marketing expense

(In thousands, except percentages)

Selling and marketing expense for the three months ended June 30, 2024 increased by $2.2 million, or 3.4%, as compared to the same period in 2023. The change was primarily due to a $5.2 million increase in marketing costs, partially offset by a $1.5 million decrease in personnel-related costs due to headcount reduction associated with our Restructuring Plan and a $1.2 million decrease in stock-based compensation driven by forfeitures.

Selling and marketing expense for the six months ended June 30, 2024 increased by $2.3 million, or 1.8%, as compared to the same period in 2023. The change was primarily due to a $10.3 million increase in marketing costs, partially offset by a $7.5 million decrease in stock-based compensation driven by forfeitures primarily due to our Restructuring Plan.

General and administrative expense

(In thousands, except percentages)

General and administrative expense for the three months ended June 30, 2024 decreased by $7.0 million, or 16.1%, as compared to the same period in 2023. The change was primarily driven by a $11.0 million decrease in stock-based compensation due to forfeitures, a $4.8 million decrease in legal and professional fees, and a $1.3 million decrease in insurance expenses, partially offset by a $8.6 million change in fair value of the contingent earn-out liabilities.

General and administrative expense for the six months ended June 30, 2024 decreased by $35.9 million, or 38.6%, as compared to the same period in 2023. The change was primarily driven by a $27.3 million decrease in stock-based compensation due to forfeitures, a $6.4 million change in fair value of the contingent earn-out liabilities, a $3.3 million decrease in legal and professional fees, and a $2.6 million decrease in insurance expenses, partially offset by a $3.4 million increase in personnel-related costs associated with our Restructuring Plan.

Product development expense

(In thousands, except percentages)

Product development expense in the three months ended June 30, 2024 decreased by $20.5 million, or 56.7%, as compared to the same period in 2023. The change was primarily driven by an $18.0 million decrease in stock-based compensation due to forfeitures and a $2.6 million decrease in personnel-related costs primarily due to a decrease in headcount associated with our Restructuring Plan.

Product development expense in the six months ended June 30, 2024 decreased by $17.7 million, or 25.5%, as compared to the same period in 2023. The change was primarily driven by a $23.2 million decrease in stock-based compensation due to forfeitures, partially offset by a $5.6 million increase in personnel-related costs primarily associated with our Restructuring Plan.

Depreciation and amortization expense

(In thousands, except percentages)

Depreciation and amortization expense for the three months ended June 30, 2024 remained relatively flat as compared to the same period in 2023. Depreciation and amortization expense for the six months ended June 30, 2024 increased by $0.5 million, or 1.6%, as compared to the same period in 2023, primarily due to the increased amortization of intangible assets.

Interest income (expense), net

(In thousands, except percentages)

Interest expense, net for the three months ended June 30, 2024 increased by $3.0 million, or 48.6%, compared to the same period in 2023. Interest expense, net for the six months ended June 30, 2024 increased by $6.7 million, or 58.9%, compared to the same period in 2023. The increases in interest expense, net for the three-month and six-month periods were due to an increase in interest rates on our outstanding debt under the credit agreements, partially offset by an increase in interest income from our investment in money market funds.

Other income (expense), net

(In thousands, except percentages)

Other expense, net for the three months ended June 30, 2024 decreased by $2.4 million, or 81.2%, compared to the same period in 2023. The change was primarily due to a $1.4 million decrease in net foreign currency exchange losses and a $1.1 million increase in net gains on interest rate swaps.

Other income, net for the six months ended June 30, 2024 increased by $7.4 million, or 114.0%, compared to the same period in 2023. The change was primarily due to a $6.9 million increase in net gains on interest rate swaps and a $0.8 million decrease in net foreign currency exchange losses.

Income tax benefit (provision)

(In thousands, except percentages)

Income tax provision was $4.6 million for the three months ended June 30, 2024, as compared to $2.7 million for the same period in 2023. Income tax provision was $12.1 million for the six months ended June 30, 2024, as compared to $5.4 million for the same period in 2023. The income tax provision is higher year over year for both the three and six months ended June 30, 2024 primarily due to the impact of Pillar Two minimum taxes applicable in 2024 and a valuation allowance recorded against certain deferred tax assets arising in both years.

Pillar Two Minimum Tax

On December 20, 2021, the Organization for Economic Cooperation and Development released the Pillar Two model rules providing a framework for implementing a 15% minimum tax, also referred to as the Global Anti-Base Erosion ("GloBE") rules, on earnings of multinational companies with consolidated annual revenue exceeding €750 million. Pillar Two legislation has been enacted in certain jurisdictions where the Company operates, including the UK and certain EU member states, and is effective for the Company's financial year beginning January 1, 2024. The Company has performed an assessment of its exposure to Pillar Two income taxes, including its ability to qualify for transitional safe harbor relief under the GloBE rules. While the Company expects to qualify for transitional safe harbor relief in most jurisdictions in which it operates, there are a limited number of jurisdictions where the transitional safe harbor is not available, including for certain entities classified as “stateless” constituent entities under the Pillar Two model rules. The Company’s income tax provision for each of the three and six months ended June 30, 2024 includes the effects of Pillar Two minimum taxes based on currently enacted legislation and guidance. The Company will continue to closely monitor Pillar Two developments, including the release of additional administrative guidance on the application of the GloBE rules, and evaluate the potential impact to the Company’s financial position.

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 (income) expense, net, depreciation and amortization expense, stock-based compensation expenses, employer costs related to stock-based compensation, foreign exchange (gain) loss, changes in fair value of contingent earn-out liability, interest rate swaps and investments in equity securities, transaction and other costs, litigation costs net of insurance reimbursements that arise outside of the ordinary course of business, tax receivable agreement liability remeasurement (benefit) expense, impairment loss, and costs associated with our Restructuring Plan, 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 (used in) 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, effectuate discretionary share repurchases 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 stock-based compensation expense and employer costs related to 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, net 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 investors 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 investors 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 provided by (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 provided by (used in) operating activities as a percentage of net earnings (loss) in each case set forth below.

We define Adjusted EBITDA as net earnings (loss) excluding income tax (benefit) provision, interest (income) expense, net, depreciation and amortization expense, stock-based compensation expense, employer costs related to stock-based compensation, foreign exchange (gain) loss, changes in fair value of contingent earn-out liability, interest rate swaps and investments in equity securities, transaction and other costs, litigation costs net of insurance reimbursements that arise outside of the ordinary course of business, tax receivable agreement liability remeasurement (benefit) expense, impairment loss, and restructuring costs. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue.

We define free cash flow as net cash provided by (used in) operating activities less capital expenditures. Free cash flow conversion represents free cash flow as a percentage of Adjusted EBITDA. Operating cash flow conversion represents net cash provided by (used in) operating activities as a percentage of net earnings (loss).

The following table reconciles our non-GAAP financial measures to the most comparable GAAP financial measures for the periods presented:

(In thousands, except percentages)

(1) Represents employer portion of Social Security and Medicare payroll taxes domestically, National Insurance contributions in the United Kingdom and comparable costs internationally related to the settlement of equity awards.

(2) Represents certain litigation costs and insurance proceeds associated with pending litigations or settlements of litigation.

(3) Represents foreign exchange (gain) loss due to foreign currency transactions.

(4) Represents fair value (gain) loss on interest rate swaps.

(5) Represents costs associated with the Restructuring Plan, such as severance, benefits and other related costs.

(6) Represents transaction costs related to acquisitions and secondary offerings such as legal, accounting, advisory fees and other related costs.

(7) Represents recognized adjustments to the tax receivable agreement liability.

Liquidity and Capital Resources

Overview

As of June 30, 2024, we had $286.7 million of cash and cash equivalents, a decrease of $69.0 million from December 31, 2023 primarily due to share repurchases, partially offset by cash generated from operations. 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, acquisition of businesses, funding our debt obligations, partnership tax distributions, paying income taxes and obligations under our tax receivable agreement and effectuating share repurchases as discussed below. 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.

In May 2023, we announced that our Board of Directors approved a share repurchase program of up to $150.0 million of our outstanding Class A common stock with repurchases under the program to be made on a discretionary basis from time to time, subject to general business and market conditions and other investment opportunities, through open market purchases or other means, including privately negotiated transactions. The Company announced increases in the share repurchase program authorized amount from $150.0 million to $300.0 million in November 2023 and from $300.0 million to $450.0 million in May 2024. This repurchase program may be commenced, suspended or discontinued at any time. There were no share repurchases during the three months ended June 30, 2024. During the six months ended June 30, 2024, share repurchases included 5.3 million shares of Class A common stock and 2.0 million Common Units for $84.4 million, excluding excise tax obligations. During the three and six months ended June 30, 2023, share repurchases included 1.3 million shares of Class A common stock for $20.9 million. As of June 30, 2024, a total of $208.7 million remained available for repurchase under the repurchase program.

On February 27, 2024, we announced that the Company adopted the Restructuring Plan to reduce its global workforce. The Restructuring Plan is expected to be completed in the third quarter of 2024, and we expect to incur approximately $20.0 million to $22.0 million of total non-recurring charges through the third quarter of 2024, substantially all of which are expected to result in future cash outlays. During the six months ended June 30, 2024, we made $15.2 million of cash payments in connection with the Restructuring Plan.

On July 1, 2024, we completed the acquisition by merger (the “Acquisition”) of the outstanding capital stock of Geneva Technologies, Inc. (“Geneva”), a privately held company, for an aggregate purchase price of approximately $17.0 million in cash, subject to specified purchase price adjustments.

Cash Flow Information

The following table summarizes our unaudited condensed consolidated cash flow information for the periods presented:

(In thousands)

Operating activities

Net cash provided by operating activities was $35.3 million and $56.1 million, respectively, in the six months ended June 30, 2024 and 2023. This includes adjustments to net earnings (loss) for the six months ended June 30, 2024 and 2023 related to: depreciation and amortization of $34.2 million and $33.7 million, respectively; stock-based compensation of $2.1 million and $62.1 million, respectively; change in fair value of interest rate swaps of $(1.7) million and $5.2 million, respectively; and change in fair value of deferred contingent consideration of $(19.3) million and $(12.9) million, respectively. The changes in assets and liabilities for the six months ended June 30, 2024 and 2023 consist primarily of: changes in accrued expenses and other current liabilities of $(25.0) million and $(11.3) million, respectively, driven by bonus payouts; changes in legal liabilities of $(25.2) million and $(18.3) million, respectively, driven by litigation settlement payments; changes in accounts receivables of $2.7 million and $(31.0) million, respectively, driven by timing of cash receipts.

Investing activities

Net cash used in investing activities was $4.5 million and $19.1 million for the six months ended June 30, 2024 and 2023, respectively. The Company had capital expenditures of $4.5 million and $9.2 million in the six months ended June 30, 2024 and 2023, respectively. The Company used $9.9 million for the acquisition of Newel Corporation (net of cash acquired) in the six months ended June 30, 2023.

Financing activities

Net cash used in financing activities was $101.0 million and $54.7 million in the six months ended June 30, 2024 and 2023, respectively. During the six months ended June 30, 2024, the Company used $62.1 million for share repurchases of our Class A common stock and Bumble Holdings used $22.2 million for the repurchase of Common Units. During the six months ended June 30, 2023, the Company used $20.9 million for share repurchases of our Class A common stock. During the six months ended June 30, 2024 and 2023, the Company used $8.2 million and $11.7 million, respectively, for shares withheld to satisfy employee tax withholding requirements upon vesting of restricted stock units and made cash distribution payments of $5.6 million and $19.2 million, respectively, to the noncontrolling interest holders. The Company used $2.9 million in both of the six months ended June 30, 2024 and 2023 to repay a portion of the outstanding indebtedness under our Original Term Loan.

Indebtedness

Senior Secured Credit Facilities

In connection with the Sponsor Acquisition, in January 2020, we entered into a credit agreement (the “Credit Agreement”) providing for (i) a term loan facility in an original aggregate principal amount of $575.0 million (the “Original Term Loan Facility”) and (ii) a revolving facility in an aggregate principal amount of up to $50.0 million. In connection with a transaction whereby we distributed proceeds to our pre-IPO owners and to partially repay a loan from our Founder, in October 2020, we entered into the Incremental Term Loan Facility (the “Incremental Term Loan Facility” and together with the Original Term Loan Facility, the “Senior Secured Credit Facilities”) in an original aggregate principal amount of $275.0 million. The Incremental Term Loan provides for additional senior secured term loans with substantially identical terms as the Original Term Loan Facility (other than the applicable margin). A portion of the net proceeds from our initial public offering was used to repay $200.0 million aggregate principal amount of our outstanding indebtedness under our Term Loan Facility in the three months ended March 31, 2021. The Credit Agreement was further amended in March 2023, pursuant to which the interest rate benchmark referenced to LIBOR was transitioned to SOFR. The borrower under the Credit Agreement is a wholly owned subsidiary of Bumble Holdings, Buzz Finco L.L.C. (the “Borrower”). The Credit Agreement contains affirmative and negative covenants and customary events of default.

Borrowings under the Credit Agreement bear interest at a rate equal to, at the Borrower’s option, either (i) LIBOR prior to March 31, 2023 and Adjusted Term SOFR beginning March 31, 2023 for the relevant interest period, adjusted for statutory reserve requirements (subject to a floor of 0.0% on the Original Term Loan and 0.50% on the Incremental Term Loan), 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 the Wall Street Journal as the “Prime Rate” in the United States, (b) the federal funds effective rate plus 0.50% and (c) adjusted LIBOR prior to April 1, 2023 and Adjusted Term SOFR beginning April 1, 2023, 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 initial public offering.

In addition to paying interest on the outstanding principal under the Credit Agreement, 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 Original Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1.00% of the principal amount of the Original Term Loan Facility outstanding as of the date of the closing of the Original Term Loan Facility, with the balance being payable at maturity on January 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 on January 29, 2027. Following the $200.0 million aggregate principal payment of outstanding indebtedness during the three months ended March 31, 2021, quarterly installment payments on the Incremental Term Loan Facility are no longer required for the remaining term of the facility. Principal amounts outstanding under the Revolving Credit Facility are due and payable in full at maturity on January 29, 2025.

Contractual Obligations and Contingencies

The following table summarizes our contractual obligations as of June 30, 2024:

(In thousands)

In connection with the IPO, in February 2021, we entered into a tax receivable agreement with certain of our pre-IPO owners that provides for the payment by the Company to such pre-IPO owners of 85% of the benefits that the Company realizes, or is deemed to realize, as a result of the Company’s allocable share of existing tax basis acquired in our IPO and other tax benefits related to entering into the tax receivable agreement. The payments under the tax receivable agreement are not conditioned upon continued ownership of the Company by the pre-IPO owners.

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 and subsequent activity through June 30, 2024 to aggregate to $709.8 million and to range over the next 15 years from approximately $16.7 million to $73.6 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 contemplated to have occurred pursuant to the Blocker Restructuring. The foregoing numbers are merely estimates, and the actual payments could differ materially. See Note 4, Payable to Related Parties Pursuant to a Tax Receivable Agreement, for additional information.

In connection with the Sponsor Acquisition in January 2020, we entered into a contingent consideration arrangement, consisting of an earn-out payment to the former shareholders of Worldwide Vision Limited of up to $150.0 million. The timing and amount of such payments, that we may be required to make, is not reflected in the contractual obligations table set forth above as the payment to the former shareholders of Worldwide Vision Limited is dependent upon the achievement of a specified return on invested capital by our Sponsor. See Note 11, Fair Value Measurements, in our 2023 Form 10-K for additional information.

In May 2023, the Company amended an agreement for third-party cloud services, which superseded and replaced the September 2022 agreement. Under the amended terms, the Company is committed to pay a minimum of $12.0 million over the period of 18 months. If at the end of the 18 months, or upon early termination, the Company has not reached the $12.0 million in spend, the Company will be required to pay for the difference between the sum of fees already incurred and the minimum commitment. As of June 30, 2024, our minimum commitment remaining is $4.7 million.

Critical Accounting Policies and Estimates

We have discussed the estimates and assumptions that we believe are critical because they involve a higher degree of judgment in their application and are based on information that is inherently uncertain in our 2023 Form 10-K for the year ended December 31, 2023. There have been no significant changes to these accounting policies and estimates for the six months ended June 30, 2024.

Related Party Transactions

For discussions of related party transactions, see Note 12, Related Party Transactions, to the condensed consolidated financial statements included in “Item 1 - Financial Statements (Unaudited).”

Foreign Currency Exchange Risk

We conduct business in certain foreign markets, primarily in the United Kingdom and the European Union. For the three months ended June 30, 2024 and 2023, revenue outside of North America accounted for 47.3% and 42.7% of consolidated revenue, respectively. Revenue outside of North America accounted for 46.8% and 42.2% of combined revenue for the six months ended June 30, 2024 and 2023, respectively. Our primary exposure to foreign currency exchange risk is the underlying user’s functional currency other than the U.S. Dollar, primarily the British Pound and Euro. As foreign currency exchange rates change, translation of the statements of operations of our international businesses into U.S. dollars affects year-over-year comparability of operating results. The average Euro versus the U.S. Dollar exchange rate was 1.1% lower and 0.1% higher in the three and six months ended June 30,

2024 compared to the three and six months ended June 30, 2023, respectively. The average British Pound versus the U.S. Dollar exchange rate was 0.8% and 2.6% higher in the three and six months ended June 30, 2024 compared to the three and six months ended June 30, 2023, respectively.

Historically, we have not hedged any foreign currency exposures. We have performed a sensitivity analysis as of June 30, 2024 and 2023. A hypothetical 10% change in British Pound and Euro, relative to the U.S. Dollar, would have changed revenue by $12.4 million and $5.5 million for the six months ended June 30, 2024 and 2023, respectively, with all other variables held constant. This accounts for 2.3% and 1.1% of total revenue for the six months ended June 30, 2024 and 2023, respectively. Our continued international expansion increases our exposure to exchange rate fluctuations and as a result such fluctuations could have a significant impact on our future results of operations.

Interest Rate Risk

At June 30, 2024, we had debt outstanding with a carrying value of $618.9 million. With consideration of the financial impact of our interest rate swaps, a hypothetical interest rate increase of 1% would have increased interest expense for the three and six months ended June 30, 2024 by $0.7 million and $1.4 million, respectively, based upon the outstanding debt balances and interest rates in effect during that period. See Note 9, Debt, within the unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report.

Borrowings under our Senior Secured Credit Facilities bear interest at a variable market rate. In order to reduce the financial impact of increases in interest rates, the Company entered into two interest rate swaps for a total notional amount of $350.0 million on June 22, 2020, which were set to expire on June 30, 2024. In January 2024, we replaced these interest rate swaps and entered into new interest rate swaps for the same notional value of $350.0 million to extend the expiration from June 2024 to January 2027. The financial impact of the interest rate swaps is to fix the variable interest rate element on $350.0 million of the long-term debt at a rate of 3.18%.

Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, has evaluated the effectiveness of our disclosure controls and procedures as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), as of the end of the period covered by this Quarterly Report on Form 10-Q. Based on such evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of June 30, 2024, our disclosure controls and procedures are effective to provide reasonable assurance that information we are required to disclose in reports that we file or submit under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the rules and forms of the SEC, and that such information is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Changes in Internal Control over Financial Reporting

There were no changes in our internal control over financial reporting during our most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

For a discussion of our risk factors, see Part I, “Item 1A—Risk Factors” of our 2023 Form 10-K. Refer also to the other information set forth in this Quarterly Report on Form 10-Q, including in the “Special Note Regarding Forward-Looking Statements,” and in Part I, “Item 2—Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and “Item 1—Financial Statements (Unaudited).”