The Bumble IPO is here…how are you swiping? Not sure? Well, let’s dig into the hive…and
try to figure out if buying in...gets us honey….or stung!
Welcome to Healthy, Wealthy, and Wise where we talk a lot about IPOs. For those of you
new here, my name is Kevin and it’s great to have you stop by as we talk about Bumble
stock today. I’ll give you some background on the company, review some financials from
the filing, give you details on the Bumble IPO itself, and maybe most importantly, share
with you some of my own thoughts on if the IPO makes sense…including giving you an
idea on Bumble’s valuation as compared to the competition. And then, if you like what
you see, maybe you’ll stick around and join the community; we’d love to have on board.
And speaking of the community, it’s great to see you guys again. And I have to give
a shout out this week to Chris, who’s been with us for awhile; last week he commented
on the glassware behind me and it cracked me up. Just to clarify to everyone out there,
particularly to law enforcement officials; those are not bongs. Now if that's your thing,
not hating, just stating… Alright let’s get to the Bumble IPO. As
many of you might recall, I put out a video in December on what I felt were the 7 top
2021 IPOs that I expected to come out early in the year and Bumble with its dating apps
was one of them. I had mentioned at the time that the company was likely to come out around
Valentine’s Day, and that’s exactly what’s happening. It would’ve been great to have
a Bumble IPO right on Valentine’s Day, but with February 14th falling on a Sunday, it
just wasn’t meant to..bee…(winks) Now it’s looking to go public before the 14th
and I’ll give you the date I expect it to start trading in a few.
Now at the time of that IPO preview video, there was nothing official, as Bumble had
yet to release a public IPO filing or S-1 form. We have that now, so before we get to
my personal thoughts on the company, let’s start off talking about some of the more important
information from the filing. And we’ll begin with a little background
of the company, just to get you up to speed, as you think about if investing in Bumble
stock makes sense. Bumble was co-founded by Whitney Wolfe Herd
and Badoo app founder Andrey Andreev who, in 2020 decided to leave the company and sold
his stake to Blackstone, amid some controversy. The company has since rebranded the Bumble
and Badoo apps under an umbrella brand named Bumble Inc. Now, as I mentioned in the preview
video, Wolfe Herd, who is also the company’s CEO, previously co-founded Match's popular
Tinder app. However, in 2014, she left Tinder and filed a sexual harassment lawsuit which
was settled later that year. I mention this for 2 reasons; one, that she has experience
in multiple successful dating apps, and two, the experience at Tinder may have led her
to the idea of developing an app that was intended to be more comfortable for women.
Soon after the settlement with Tiinder, she met up with Andreev and founded Bumble, a
company with an app that’s purpose was to lead to less pressure and more empowerment
of women by only letting women users initiate conversations in heterosexual matches. The
app, while known primarily as a dating app, has evolved where it can be used for platonic
friendships with Bumble BFF and business networking with Bumble Bizz, 2 areas that the company
looks to further develop and monetize. So if you’re not familiar with the Bumble
app, location-based matches are made by using the swipe method that became popular with
Tinder, which, not surprisingly, led to even more lawsuits between the companies that have
since come to resolutions. Anyways, in the app, you swipe right if you’re interested,
and left if you’re not. So as you watch the video and make your decision on investing
in the company, I think what would be great if everyone could either comment simply ‘left’
if you’re going to pass on the Bumble IPO, or ‘right’ if you interested in buying
Bumble stock. I always like to know what you in the community are thinking.
So getting back to the company, Bumble Inc. now offers 2 apps, the traditional Bumble
app that most are familiar with in the US, Canada, Australia and the UK, and the Badoo
app which is popular in Latin American and Europe. As far as popularity from a revenue
perspective, Bumble is the second highest grossing dating app in the world according
to Sensor Tower, with 12.3 million monthly active users as of September 30, 2020. The
company also reports the Bumble app experienced approximately 30% growth in the number of
messages sent by women from the three months ended March 30, 2019 to the three months ended
September 30th of last year. While the app can be free to use, you can also pay for premium
features that are meant to entice their users. Bumble offers premium tiers that, depending
on what tier is purchased, allows users unlimited swipes, the ability to undo swipes, the use
of "SuperSwipes" to get a person's attention, the option to extend matches and connections
after they expire, allows the user to see who likes you right away, swipe outside your
home region, turn your profile invisible, and apply unlimited filters to your matches…again,
all features that try to move users to start paying for. In their filing, the company states
that they had approximately 1.1 million Bumble App Paying Users during the nine months ended
September 2020. Now Badoo is no slouch either, as it’s the
fourth highest grossing dating app in the world, again according to Sensor Tower, with
28.4 million monthly active users as of September 30th. They report having had approximately
1.3 million Badoo App and Other Paying Users during the nine months ended September 30th.
So now with those statistics in hand, it’s time to take a look at how they translate
towards the financials. Typically, I put up a chart to show these for you to see, but
these financials are really hard to follow from the S-1 because of how accounting was
done over 3 re-organizations of the company’s ownership structure. Instead I’ll share
with you an excerpt from the filing that has the key financial data.
On your screen, you’ll see that for the years ended December 31, 2018 and 2019, the
company generated Total Revenue of $360.1 million in 2018 and $488.9 million in 2019,
representing year-over-year growth of 35.8%. Breaking down the revenue between the apps,
Bumble’s Revenues grew from $162.4 million to $275.5 million, representing year-over-year
growth of 69.7%, while revenue from Badoo and other sources grew at a slower rate of
7.9%, with revenue in 2018 of $197.7 million growing to $213.4 million in 2019. So even
though Badoo has double the monthly active users, the bulk of the revenue is generated
from Bumble. Also looking at the same time period, the
company had become profitable, with Bumble reporting a net loss of $23.7 million in 2018
to net earnings of $85.8 million in 2019. And then more recently, looking at the numbers
from January 29th through September 30th, in those 8 months revenue came in at $376.6
million with $231.5 million of that coming from the Bumble app and $145.1 million coming
from the Badoo App and Other sources. If we could simply average that out over 12 months,
which isn’t always apples to apples, but for discussion sake, total revenue would,
or I should say, could…come in at 565 million dollars, ahead of fiscal year 2019 revenue
by approximately 76 million dollars, which would actually be a slower rate of growth..
Now as to their overall net profit number, the company has gone back to showing a Net
loss of $84.1 million from January 29th through September 30th. Going from a profit to a loss,
doesn’t sound good on the surface, however, the company shared that Net losses in the
period were impacted by ownership change transaction costs of $40.3 million and by depreciation
and amortization of $65.8 million, as well as negative changes in assets and liabilities
of $41.8 million also in the period. So if you instead look at Adjusted EBITDA to exclude
that, the company generated $98.9 million which might give you a more accurate idea
of the business operations. Before we start discussing the considerations
for investing in the company, let’s talk about details of the Bumble IPO itself. The
company plans to raise $1 billion by offering 34.5 million shares at a price range of $28
to $30. At the midpoint of the proposed range, Bumble would command a fully diluted market
value of $5.8 billion, which is real close to the 6-8 billion dollar value we estimated
back in December. Of course, we know if there ends up being a lot of interest in the IPO,
the company could upsize the offering or revise the price higher, so we’ll just have to
see what happens; these things are always fluid right up until the IPO occurs. As to
when is the Bumble IPO date?...again this could change too, but as of this recording,
we’re expecting the actual IPO to occur on Wednesday and then Bumble stock would start
to trade on the public market on Thursday, February 11th under the ticker, BMBL.
Okay, so that gets us to thinking about if the IPO makes sense to invest in. Before I
share my own thoughts, just a quick reminder that I’m not a financial advisor or analyst,
and while this video is meant to be informative, it should not be seen as a recommendation
for you to take any action based on my personal opinions—you should always do your own research
or consult with your own financial advisor when making any investment decision. Got it?
Got it! Alright, so aside from the financials and
growth rate, two of the first things that I consider for a company going public are
the growth of the market that a company is participating in, and, within that market,
who is the competition. As to the market, online dating continues to grow. I’m old
enough to remember when it was still new. And even though it was considered to be dangerous
or desperate at the time, I’m not ashamed to say that I had done it back in the day…without
any issues…yep, still alive! Nowadays, it’s obviously very common and doesn’t have that
negative stigma it had back then, but the question now is, is the size of the market
fully realized…or is there room for more growth? For some data on this, according to
OC&C Strategy Consultants, the North American online dating market is projected to grow
approximately 11% annually from approximately $2 billion in 2020 to approximately $3.4 billion
in 2025 and then the global market, which they were clear to say excludes China, is
projected to grow approximately 13% annually from approximately $5.3 billion in 2020 to
approximately $9.9 billion in 2025. According to their research, the primary drivers of
market growth include a growing singles population and further penetration of online dating and
increased monetization. This data just reinforces my own thoughts that there still is a growing
market, and a market that continues to grow into the everyday mainstream of society.
Now the second consideration I mentioned is the competition, and the big fish out there
is Match. Now I’ve shared in other videos and in live streams that I do own Match stock.
And the reasons I bought into Match was that, as I said, I believed in the market opportunity,
but also because they are the behemoth in the industry; I mean, when you think of sites
or apps like Tinder, Match.com, Okcupid, Plenty of Fish, Hinge…et cetera, et cetera, they’re
all owned by Match. And many of those sites weren’t developed by Match, but acquired
by them. So the company was taking a proactive step to be the dominant company in the market,
and thereby widening their moat. In fact, back in 2017 there were multiple reports that
Match came calling for Bumble in order to acquire them as well, but Bumble turned them
down. That led to a couple of years of litigation that finally was settled as of last summer.
Now big picture, assuming not much changes since I recorded this, although if it does,
as a shareholder, I hope it goes higher!.... Match is valued at a $42 billion dollar market
cap, and based on the trailing 12 months revenue, the price to sales ratio is around 17. Keep
that number in mind because we'll look at Bumble's in a minute.
Now as of right now, Bumble is doing really well for themselves and found success in their
created niche with their “women make the first move” mantra. The Bumble app is only
behind Tinder in popularity, although still behind by a pretty significant margin.
So when thinking about Bumble, I think it could be a good company to own, particularly
if you can get shares near or even a little over the suggested pricing range. Looking
at past revenues with the expectation of about a 6 billion dollar market cap, the suggested
pricing appears reasonable at a price to sales ratio of around 12, especially when we look
at the market leader Match, who again, has a price to sales of their own over 17. I feel
like Bumble has done a good job in creating and exploiting their niche and have some solid
revenues they’ve generated, in a market, as we said, that continues to grow. The competition
factor with Match wouldn’t scare me off because of how well they’ve competed against
them so far, I mean if they end up becoming the preferred app of a whole gender demographic,
that’s a significant demographic to own! Now a consideration on the side of caution
for both Bumble and Match is the low barrier of entry to the market, meaning that anyone
that knows how to create an app, and there's a lot of smart people out there that do, could
potentially enter the market pretty easily and further increase competition. But, on
the flip side, the thing with dating apps is that people using them...don’t only stick
with using one at a time; they’ll use quite a few to expand their odds of finding what
they’re looking for…whether that’s a long term relationship or whatever…not judging.
The key for Bumble will be the same for Tinder, looking to continue to entice their users
to pay for the premium tiers. Then one other thing that’s always in the back of my mind,
is if Match were to come calling again for Bumble, at this point in time, they would
have to really pay up, so while I’m not predicting that would happen, that wouldn’t
hurt Bumble stock at all. Looking back to last spring, I remember a
couple of friends who knew I held Match stock were telling me that they would be concerned
how it might do during the pandemic. However, I wasn't worried, because in my thinking,
with fewer things to be able to go out and do, and with people still being social in
nature, I felt that the use of these apps would only go up. I mean while you couldn't
go out on a date, you had all this free time by staying in, maybe feeling alone, and you
still could message people. And if someone was on the fence about online dating, this
was an opportunity to give it a shot, without the extra pressure of having to meet someone
right away. And at the end of the day, the data has basically shown that the pandemic
only helped these dating apps. So to me, these dating app companies like Bumble and Match
are both stay-at-home and back-to-normal stocks. Now anyone that’s watched me for awhile
knows I won’t tell you what to do or what I expect the price to be since I don’t have
the ability to predict the future. If I was born with that talent, I would definitely
share that information with my community. The most I strive to do for you is pull in
the information and try to share it with you in an easy to understand manner and share
some of my thoughts on it and I hope you find value in that. At the end of the day, I always
trust you to know what’s best for you to do with your money based on your personal
thoughts and situation. Now we wait to see where it’s priced and
where it trades, and in the IPO market of 2021, who knows where this will trade. Remember
to let you know if you’re swiping left on the Bumble IPO or swiping right, I really
want to know. I hope you enjoyed the video and found it
helpful, and if you did, please push that like button, comment on it, and share with
your friends and on any of your social media sites and forums you’re on—it’s really
important and is a way for you to help me grow the channel, and the more it grows, the
more resources I’ll put towards it. And again, if you’re new to the channel or just
an occasional visitor, I hope I won you over and you decide to subscribe and join the community
…we’d love to have you onboard. With that, thank you for watching and, until next time,
have a great day!