BUMBLE INC. You should read the following discussion and analysis of the financial condition and results of operations ofBumble 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" and Part I, "Item 1A-Risk Factors" in our 2021 Form 10-K.
Overview
We provide online dating and social networking platforms through subscription and in-app purchases of dating products servicingNorth America ,Europe and various other countries around the world. Bumble operates three apps, Bumble, Badoo and Fruitz. Our apps monetize via a freemium model, where the use of the service is free and a subset of the users pay for subscriptions or in-app purchases to access premium features. We launched 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. Badoo app, launched in 2006, was one of the pioneers of web and mobile free-to-use dating products. InJanuary 2022 , we acquired Fruitz, a fast-growing dating app with a Gen Z focus, which is a growing segment of online dating consumers. Fruitz encourages open and honest communication of dating intentions through playful fruit metaphors. Our consolidated results for the three and nine months endedSeptember 30, 2022 included the operating results of Fruitz fromJanuary 31, 2022 . Revenues from Fruitz were included inBadoo App and Other Revenue but excluded from our key operating metrics. For additional information, see Note 6, Business Combination, to our unaudited condensed consolidated financial statements included in Part I, "Item 1 - Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q.
Quarter ended
For the three months ended
•
Total Revenue of
•
Bumble App Revenue of
•
•
Net earnings (loss) of
•
Adjusted EBITDA of
Year-to-Date
For the nine months ended
•
Total Revenue of
•
Bumble App Revenue of
•
•
Net earnings of
•
Adjusted EBITDA of
•
Net cash provided by operating activities of
•
Free cash flow of
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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 Fruitz:
(As Revised) (As Revised)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
(In thousands, except ARPPU) 2022 2021 2022 2021
Key Operating Metrics
Bumble App Paying Users 2,088.1 1,532.6 1,929.3 1,452.8
Badoo App and Other Paying Users 1,202.2 1,333.4 1,176.8 1,412.7
Total Paying Users 3,290.3 2,866.0 3,106.1 2,865.5
Bumble App Average Revenue per Paying
User $ 28.84 $ 30.71 $ 29.00 $ 29.00
Badoo App and Other Average Revenue per
Paying User $ 12.75 $ 13.73 $ 13.26 $ 13.08
Total Average Revenue per Paying User $ 22.96 $ 22.81 $ 23.03 $ 21.15
(As Revised) (As Revised)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
(In thousands, except per share / unit
2022 2021 2022 2021
Condensed Consolidated Statements of
Operations Data:
Revenue $ 232,639 $ 199,147 $ 661,875 $ 553,865
Net earnings (loss) 26,405 (10,385 ) 45,122 295,654
Net earnings (loss) attributable to Bumble
Inc. shareholders / Buzz Holdings L.P.
owners 18,063 (7,333 ) 30,824 322,257
Net earnings (loss) per unit attributable
to Bumble Inc. shareholders / Buzz
Holdings L.P. owners
Basic earnings (loss) per share / unit $ 0.14 $ (0.06 ) $ 0.24 $ 1.57
Diluted earnings (loss) per share / unit $ 0.14 $ (0.06 ) $ 0.23 $ 1.53
September 30, December 31,
(In thousands) 2022 2021
Condensed Consolidated Balance Sheets
Data:
Total assets $ 3,792,838 $ 3,776,996
Cash and cash equivalents 365,105 369,175
Long-term debt, net including current
maturities 625,989 628,981
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, 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
45
--------------------------------------------------------------------------------that arise outside of the ordinary course of business and tax receivable agreement liability remeasurement benefit. Adjusted EBITDA margin represents Adjusted EBITDA as a percentage of revenue.
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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.
Impact of Russia-Ukraine Conflict
The ongoing conflict betweenRussia andUkraine has increased global economic and political uncertainty. OnMarch 8, 2022 , we announced that we will discontinue our operations inRussia and remove all of our apps from theApple App Store andGoogle Play Store inRussia andBelarus . Our decision to discontinue our operations inRussia and remove all of our apps from theApple App Store andGoogle Play Store inRussia andBelarus has led to reduced revenues and Paying Users from these countries and increased costs. For further information regarding revenues and Paying Users see the "Results of Operations-Comparison of the Three and Nine Months EndedSeptember 30, 2022 and 2021-Revenue" section further below. For further information regarding the cost related to our discontinuation of operations inRussia see Note 9, Restructuring, to our unaudited condensed consolidated financial statements included in Part I, "Item 1 - Financial Statements (Unaudited)" of this Quarterly Report on Form 10-Q. As ofSeptember 30, 2022 , the net assets of our subsidiary inRussia comprised 0.1% of total net assets. For the three and nine months endedSeptember 30, 2022 , revenues fromRussia ,Belarus andUkraine combined were approximately 0.5% and 0.9%, respectively, of our total revenues. Operating costs related to our Russian operations were approximately 0.3% and 1.6% of our total operating costs for the three and nine months endedSeptember 30, 2022 . For additional information, see "Risk Factors-Risks Related to Our Brand, Products and Operations-Our operations may be adversely affected by ongoing developments inRussia ,Ukraine and surrounding countries, including due to the impact of our decision to discontinue our operations inRussia and remove our apps from theApple App Store andGoogle Play Store inRussia andBelarus " in Part I, Item 1A. of our 2021 Form 10-K.
Impact of COVID-19
Since early 2020, COVID-19 has 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, as well as changes in consumer behavior as some individuals have become reluctant to engage in social activities with people outside their households. While many jurisdictions have relaxed restrictions, others have remained in place with some areas continuing to experience renewed outbreaks and surges in infection rates despite more widespread availability of vaccines. Future prevention and mitigation measures, as well as the potential for some of these measures to be reinstituted in the event of subsequent waves or the emergence of new variants of the virus, have had and are likely to continue to have an adverse impact on global economic conditions and consumer confidence and spending in many parts of the world for some time. Such macroeconomic conditions have adversely affected and may continue to adversely affect demand, and/or users' ability to pay, for our products and services, particularly in the geographic and demographic markets in which Badoo app operates. Given the continued uncertainty around the duration and severity of the impact on market conditions and the business environment, the impact of the COVID-19 pandemic on our business, financial condition and results of operations going forward remains uncertain for the foreseeable future. For additional information, see "Risk Factors-General Risk Factors-Our business and results of operations may be materially adversely affected by the ongoing COVID-19 outbreak or other similar outbreaks" and "Risk Factors-General Risk Factors-An economic downturn or economic uncertainty may adversely affect consumer discretionary spending and demand for our products and services" in Part I, Item 1A. of our 2021 Form 10-K.
Macroeconomic Conditions
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The prevailing global economic climate, Russia -Ukraine conflict and other
macroeconomic conditions, including but not limited to slower growth or economic
recession, changes to fiscal and monetary policy and exchange rate fluctuations
have adversely affected and may continue to adversely impact our business as
consumers face greater pressure on disposable income. The increase in interest
rates by the Federal Reserve and overall market conditions have led to
significant strengthening of the U.S. dollar against other global currencies in
2022. A strong U.S. dollar has impacted and may continue to impact our revenue
and earnings through the remainder of 2022 and extending into 2023. 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-An economic
downturn or economic uncertainty may adversely affect consumer discretionary
spending and demand for our products and services" in Part I, Item 1A. of our
2021 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.
Initial Public Offering and Offering Transactions
OnFebruary 10, 2021 , our registration statement on Form S-1 relating to our initial public offering ("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. used to repay outstanding indebtedness under our Term Loan Facility totaling approximately$200.0 million in aggregate principal amount and approximately$148.3 million for general corporate purposes, and to bear all of the expenses of the IPO.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".
Secondary Offering
OnSeptember 15, 2021 , the Company completed a secondary offering of 20.7 million shares of Class A common stock on behalf of certain selling stockholders affiliated with Blackstone Inc. (the "Selling Stockholders") at a price of$54.00 per share. This transaction resulted in the issuance of 9.2 million Class A shares for the period endingSeptember 30, 2021 . Bumble did not sell any shares of Class A common stock in the offering and did not receive any of the proceeds from the sale. Bumble paid the costs associated with the sale of shares by the Selling Stockholders, net of the underwriting discounts. 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 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.Bumble Inc.'s accounting predecessor,Bumble Holdings is and has been since the Sponsor Acquisition, treated as a flow-through entity forU.S. federal income tax purposes, and as such, has 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 period 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. 47 -------------------------------------------------------------------------------- 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 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 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 includes the Company's allocable share of existing tax basis acquired in the IPO, which we have determined to be approximately$1,728 million . In determining the Company'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 ofSeptember 30, 2022 . 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$389.0 million associated with the tax receivable agreement related to these benefits. The ability of the deferred tax assets to be realized 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 ability of the deferred tax assets to be realized 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. During the three months endedSeptember 30, 2022 , our tax receivable agreement liability did not materially change. 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,U.S. Plan, and Non-U.S. Plan were reclassified as follows:
•
The Time-Vesting and Exit-Vesting ClassB Units inBumble Holdings under the Founder Plan and granted to Senior Management under theU.S. Plan were reclassified to vested Incentive Units (in the case of Vested ClassB Units ) and unvested Incentive Units (in the case of unvested ClassB Units ) inBumble Holdings .
•
The Time-Vesting and Exit-Vesting ClassB Units inBumble Holdings (other than those granted to senior management) were reclassified to Class A common stock (in the case of vested ClassB Units ) and restricted shares of Class A common stock (in the case of unvested ClassB Units ) inBumble Inc.
•
The Time-Vesting and Exit-Vesting Phantom ClassB Units inBumble Holdings were reclassified into vested RSUs (in the case of vested Class B Phantom Units) and unvested RSUs (in the case of unvested Class B Phantom Units) inBumble Inc. As the modification resulted in a change from liability-settled to equity-settled, the RSUs were fair valued at the date of the IPO. 48 -------------------------------------------------------------------------------- In all cases of respective reclassifications, the Post-IPO awards retained the same terms and conditions (including applicable vesting requirements). 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 Incentive Plan (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.
•
Shares of Class A common stock issuable in exchange for an equivalent number of Common Units inBumble Holdings to be received upon the conversion of vested Time-Vesting and Exit-Vesting Incentive Units inBumble Holdings . At the IPO date, we concluded that our public offering represented a qualifying liquidity event that would cause the Exit-Vesting awards' performance conditions to be probable. As such, we started to recognize stock-based compensation expense for the Exit-Vesting awards. OnJuly 15, 2022 , the Exit-Vesting awards, with vesting based on certain performance conditions, were modified to also provide for time-based vesting in 36 equal installments and we began to recognize incremental stock-based compensation associated with the modification of these awards. Compensation cost related to the modified Exit-Vesting awards for the three months endedSeptember 30, 2022 and 2021 was$16.0 million and$3.6 million , respectively, and$19.5 million and$22.7 million , respectively, for the nine months endedSeptember 30, 2022 and 2021.
For additional information, see Note 15, 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 the Bumble, Badoo and Fruitz 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 outside ofthe United States andUnited Kingdom , 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. 49 --------------------------------------------------------------------------------
Cost of revenue also includes data center expenses such as rent, power and bandwidth for running servers, employee compensation (including stock-based compensation) and, other employee related costs 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 of right-of-use assets, changes in fair value of contingent earn-out liability, expenses associated with facilities, information technology, external professional services, legal costs, settlement of legal claims, 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) Interest income (expense) 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 income (expense), net consists of insurance reimbursement proceeds, impacts from foreign exchange transactions, tax receivable agreement liability remeasurement (benefit) expense, loss on debt extinguishment and fair value changes in derivatives 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 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. 50 --------------------------------------------------------------------------------
Results of Operations
The following table sets forth our unaudited condensed consolidated statement of operations information for the periods presented:
(As Revised) (As Revised)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
(In thousands) 2022 2021 2022 2021
Revenue $ 232,639 $ 199,147 $ 661,875 $ 553,865
Operating costs and expenses:
Cost of revenue 64,581 55,265 181,702 151,597
Selling and marketing expense 64,316 55,105 180,628 151,654
General and administrative expense 29,815 45,726 107,636 215,631
Product development expense 25,828 24,231 73,479 84,197
Depreciation and amortization
expense 19,755 27,022 73,835 80,882
Total operating costs and expenses 204,295 207,349 617,280 683,961
Operating earnings (loss) 28,344 (8,202 ) 44,595 (130,096 )
Interest income (expense) (6,866 ) (5,676 ) (18,446 ) (18,861 )
Other income (expense), net 6,545 3,773 24,729 7,489
Income (loss) before income taxes 28,023 (10,105 ) 50,878 (141,468 )
Income tax benefit (provision) (1,618 ) (280 ) (5,756 ) 437,122
Net earnings (loss) 26,405 (10,385 ) 45,122 295,654
Net earnings (loss) attributable to
noncontrolling interests 8,342 (3,052 ) 14,298 (26,603 )
Net earnings (loss) attributable to
Bumble Inc. shareholders / Buzz
Holdings L.P. owners $ 18,063 $ (7,333 ) $ 30,824 $ 322,257
The following table sets forth our unaudited condensed consolidated statement of
operations information as a percentage of revenue for the periods presented:
(As Revised) (As Revised)
Three Months Three Months Nine Months Nine Months
Ended September Ended September Ended September Ended September
30, 2022 30, 2021 30, 2022 30, 2021
Revenue 100.0 % 100.0 % 100.0 % 100.0 %
Operating costs and expenses:
Cost of revenue 27.8 % 27.8 % 27.5 % 27.4 %
Selling and marketing expense 27.6 % 27.7 % 27.3 % 27.4 %
General and administrative expense 12.8 % 23.0 % 16.3 % 38.9 %
Product development expense 11.1 % 12.2 % 11.1 % 15.2 %
Depreciation and amortization
expense 8.5 % 13.6 % 11.2 % 14.6 %
Total operating costs and expenses 87.8 % 104.1 % 93.3 % 123.5 %
Operating earnings (loss) 12.2 % (4.1 )% 6.7 % (23.5 )%
Interest income (expense) (3.0 )% (2.9 )% (2.8 )% (3.4 )%
Other income (expense), net 2.8 % 1.9 % 3.7 % 1.4 %
Income (loss) before income taxes 12.0 % (5.1 )% 7.7 % (25.5 )%
Income tax benefit (provision) (0.7 )% (0.1 )% (0.9 )% 78.9 %
Net earnings (loss) 11.4 % (5.2 )% 6.8 % 53.4 %
Net earnings (loss) attributable to
noncontrolling interests 3.6 % (1.5 )% 2.2 % (4.8 )%
Net earnings (loss) attributable to
Bumble Inc. shareholders / Buzz
Holdings L.P. owners 7.8 % (3.7 )% 4.7 % 58.2 %
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The following table sets forth the stock-based compensation expense, net of forfeitures, included in operating costs and expenses:
Three Months Three Months Nine Months Nine Months
Ended September Ended September Ended September Ended September
(In thousands) 30, 2022 30, 2021 30, 2022 30, 2021
Cost of revenue $ 807 $ 808 $ 2,726 $ 3,019
Selling and marketing expense 3,779 2,545 4,547 10,186
General and administrative expense 23,080 11,287 45,627 49,155
Product development expense 9,509 9,123 24,279 37,142
Total stock-based compensation expense
Comparison of the Three and Nine Months Ended
Revenue
(As Revised) (As Revised)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
(In thousands) 2022 2021 2022 2021
Bumble App $ 180,641 $ 141,216 $ 503,482 $ 379,176
Badoo App and Other 51,998 57,931 158,393 174,689
Total Revenue $ 232,639 $ 199,147 $ 661,875 $ 553,865
Total Revenue for the three months ended September 30, 2022 increased by $33.5
million , or 16.8%, compared to the same period in 2021 primarily driven by
growth in Total Paying Users and, to a lesser extent, a slight increase in Total
Average Revenue per Paying User.
Bumble App Revenue for the three months ended September 30, 2022 increased by
$39.4 million , or 27.9%, compared to the same period in 2021 driven by a 36.2%
increase in Bumble App Paying Users to 2.1 million. The increase in Bumble App
Revenue was due to higher re-engagement rates in core markets and international
expansion partially offset by fluctuations in foreign currency exchange rates.
The decline of 6.1% in Bumble App Average Revenue per Paying Users was due to fluctuations in foreign currency exchange rates partially offset by pricing initiatives.
Badoo App and Other Revenue for the three months endedSeptember 30, 2022 , decreased by$5.9 million , or 10.2%, compared to the same period in 2021. This decrease was driven by a 9.8% decrease inBadoo App and Other Paying Users to 1.2 million due to the Company's decision to remove all of its apps from theApple App Store andGoogle Play Store inRussia andBelarus inMarch 2022 and the continued impact of COVID and macroeconomic conditions. We expect the impact of COVID and macroeconomic conditions to continue to have an adverse impact onBadoo App and Other Paying Users in the fourth quarter of 2022. The decline of 7.1% inBadoo App and Other Average Revenue per Paying Users to$12.75 also contributed to the decrease inBadoo App and Other Revenue. The decrease inBadoo App and Other Average Revenue per Paying Users was due to the impact of theUkraine conflict and fluctuations in foreign currency exchange rates partially offset by pricing optimization. In addition, other revenue of$6.0 million for the three months endedSeptember 30, 2022 , increased by$3.0 million , or 99.2% compared to the same period in 2021, primarily due to Fruitz. Total Revenue for the nine months endedSeptember 30, 2022 increased by$108.0 million , or 19.5%, compared to the same period in 2021 primarily driven by growth in Total Paying Users and an increase in Total Average Revenue per Paying User. Bumble App Revenue for the nine months endedSeptember 30, 2022 increased by$124.3 million , or 32.8%, compared to the same period in 2021 driven by a 32.8% increase in Bumble App Paying Users to 1.9 million. The increase in Bumble App Revenue was due to higher re-engagement in core markets and international expansion partially offset by fluctuations in foreign currency exchange rates. 52 --------------------------------------------------------------------------------Badoo App and Other Revenue for the nine months endedSeptember 30, 2022 , decreased by$16.3 million , or 9.3%, compared to the same period in 2021. This decrease was driven by a 16.7% decrease inBadoo App and Other Paying Users to 1.2 million due to the Company's decision to remove all of its apps from theApple App Store andGoogle Play Store inRussia andBelarus inMarch 2022 and the continued impact of COVID and macroeconomic conditions. We expect the impact of COVID and macroeconomic conditions to continue to have an adverse impact onBadoo App and Other Paying Users in the fourth quarter of 2022. The decline inBadoo App and Other Revenue for the nine months endedSeptember 30, 2022 was partially offset by the increase of 1.4% inBadoo App and Other Average Revenue per Paying Users to$13.26 . In addition, other revenue of$18.0 million for the nine months endedSeptember 30, 2022 , increased by$9.6 million , or 113.7% compared to the same period in 2021, primarily due to Fruitz. Cost of revenue (As Revised) (As Revised) Nine Months Nine Months Three Months Three Months Ended Ended Ended September Ended September September 30, September 30, (In thousands, except percentages) 30, 2022 30, 2021 2022 2021 Cost of revenue $ 64,581$ 55,265 $ 181,702 $ 151,597 Percentage of revenue 27.8 % 27.8 % 27.5 % 27.4 % Cost of revenue for the three months endedSeptember 30, 2022 increased by$9.3 million , or 16.9%, as compared to the same period in 2021 driven primarily by growth in in-app purchase fees due to increasing revenue. As a percentage of revenue, cost of revenue was relatively flat, with an increase in fees due to the adoption ofSeptember 30, 2022 increased by$30.1 million , or 19.9%, as compared to the same period in 2021 driven by growth in in-app purchase fees due to increasing revenue. As a percentage of revenue, cost of revenue was relatively flat, with an increase in fees due to the adoption of
We expect cost of revenue as a percentage of revenue to be negatively impacted
by additional fees from the adoption of
Selling and marketing expense
Nine Months Nine Months
Three Months Three Months Ended Ended
Ended September Ended September September 30, September 30,
(In thousands, except percentages) 30, 2022 30, 2021 2022 2021
Selling and marketing expense
$ 180,628 $ 151,654 Percentage of revenue 27.6 % 27.7 % 27.3 % 27.4 % Selling and marketing expense for the three months endedSeptember 30, 2022 increased by$9.2 million , or 16.7%, as compared to the same period in 2021. The change was primarily due to a$6.7 million increase in digital and social media marketing costs and a$2.2 million increase in personnel-related expenses. Selling and marketing expense for the nine months endedSeptember 30, 2022 increased by$29.0 million , or 19.1%, as compared to the same period in 2021. The change was primarily due to a$27.2 million increase in digital and social media marketing costs and a 53 --------------------------------------------------------------------------------
General and administrative expense
Nine Months Nine Months
Three Months Three Months Ended Ended
Ended September Ended September September 30, September 30,
(In thousands, except percentages) 30, 2022 30, 2021 2022 2021
General and administrative expense $ 29,815
$ 107,636 $ 215,631 Percentage of revenue 12.8 % 23.0 % 16.3 % 38.9 % General and administrative expense for the three months endedSeptember 30, 2022 decreased by$15.9 million , or 34.8%, as compared to the same period in 2021. The change is primarily driven by a decline of$32.2 million in the fair value of the contingent earn-out liabilities, partially offset by a$11.8 million increase in stock-based compensation primarily due to the incremental expense associated with the modification of Exit-Vesting awards with certain performance conditions to also provide for vesting with time-based service conditions, a$2.9 million increase in personnel-related expenses and a$0.8 million increase in professional fees. General and administrative expense for the nine months endedSeptember 30, 2022 decreased by$108.0 million , or 50.1%, as compared to the same period in 2021. The change is primarily driven by a decline of$124.1 million in the fair value of the contingent earn-out liabilities, a$6.6 million decrease in non-recurring transaction costs and professional service fees incurred in relation to the IPO in the three months endedMarch 2021 and a$3.5 million decrease in stock-based compensation due to forfeitures. These decreases were partially offset by a$15.1 million increase in personnel-related expenses, a$4.4 million right-of-use asset impairment loss related to ourMoscow office, a$3.7 million increase in insurance expenses and a$3.3 million increase in other overhead expenses. Product development expense Three Months Three Months Nine Months Nine Months Ended September Ended September Ended September Ended September (In thousands, except percentages) 30, 2022 30, 2021 30, 2022 30, 2021 Product development expense $ 25,828$ 24,231 $ 73,479 $ 84,197 Percentage of revenue 11.1 % 12.2 % 11.1 % 15.2 % Product development expense in the three months endedSeptember 30, 2022 increased by$1.6 million , or 6.6%, as compared to the same period in 2021. The change is primarily driven by a$1.3 million increase in personnel-related expenses and a$0.4 million increase in stock-based compensation due to the incremental expense associated with the modification of Exit-Vesting awards with certain performance conditions to also provide for vesting with time-based service conditions. Product development expense in the nine months endedSeptember 30, 2022 decreased by$10.7 million , or 12.7%, as compared to the same period in 2021, primarily due to a$12.9 million decrease in stock-based compensation due to forfeitures partially offset by a$1.9 million increase in personnel-related expenses.
Depreciation and amortization expense
Three Months Three Months Nine Months Nine Months
Ended September Ended September Ended September Ended September
(In thousands, except percentages) 30, 2022 30, 2021 30, 2022 30, 2021
Depreciation and amortization expense $ 19,755 $ 27,022 $ 73,835 $ 80,882
Percentage of revenue 8.5 % 13.6 % 11.2 % 14.6 %
Depreciation and amortization expense for the three months ended September 30,
2022 decreased by $7.3 million , or 26.9%, as compared to the same period in
2021. For the nine months ended September 30, 2022 , depreciation and
amortization expense decreased by $7.0 million , or 8.7%, as compared to the same
period in 2021. The decreases in depreciation and amortization expense for the
three-month and nine-month periods were primarily due to the full amortization
of the legacy Badoo user base in July 2022 and
54
--------------------------------------------------------------------------------
the impairment of certain white label contracts in 2021. These decreases were
partially offset by increases in the amortization of intangibles acquired from
the Fruitz acquisition in January 2022 .
Interest income (expense)
(As Revised)
(As Revised) Nine Months Nine Months
Three Months Three Months Ended Ended
Ended September Ended September September 30, September 30,
(In thousands, except percentages) 30, 2022 30, 2021 2022 2021
Interest income (expense) $ (6,866 ) $ (5,676 ) $ (18,446 ) $ (18,861 )
Percentage of revenue (3.0 )% (2.9 )% (2.8 )% (3.4 )%
Interest expense for the three months ended
Interest expense for the nine months endedSeptember 30, 2022 decreased by$0.4 million , or 2.2%, compared to the same period in 2021 as we repaid$200.0 million of debt inMarch 2021 partially offset by an increase in interest rates on our outstanding debt under the credit agreements.
Other income (expense), net
(As Revised)
Three Months Three Months Nine Months Nine Months
Ended September Ended September Ended September Ended September
(In thousands, except percentages) 30, 2022 30, 2021 30, 2022 30, 2021
Other income (expense), net $ 6,545 $ 3,773 $ 24,729 $ 7,489
Percentage of revenue 2.8 % 1.9 % 3.7 % 1.4 %
Other income (expense), net in the three months ended
Other income (expense), net in the nine months endedSeptember 30, 2022 increased by$17.2 million , or 230.2%, compared to the same period in 2021, primarily due to a$15.6 million increase in net gain on interest rate swaps and a$3.4 million loss on extinguishment of long-term debt recognized when we repaid$200.0 million of debt inMarch 2021 , partially offset by a$1.7 million decline in the tax receivable agreement liability and a$0.3 million decrease in fair value of investments in equity securities.
Income tax benefit (provision)
(As Revised)
Three Months Nine Months
Three Months Ended Nine Months Ended
Ended September September Ended September September 30,
(In thousands, except percentages) 30, 2022 30, 2021 30, 2022 2021
Income tax benefit (provision)
$ (5,756 ) $ 437,122 Effective tax rate 5.8 % (2.8 )% 11.3 % 309.0 % 55
-------------------------------------------------------------------------------- Income tax provision was$(1.6) million for the three months endedSeptember 30, 2022 , compared to$(0.3) million for the same period in 2021. Income tax provision was$(5.8) million for the nine months endedSeptember 30, 2022 , compared to a benefit of$437.1 million for the same period in 2021. The tax benefit of$437.1 million recorded in the nine months endedSeptember 30, 2021 includes a$441.5 million tax benefit related to the reversal of a net deferred tax liability, which was due to the restructuring of our international operations.
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, depreciation and amortization, 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 and impairment loss, 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 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 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
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.
56
--------------------------------------------------------------------------------
We define Adjusted EBITDA as net earnings (loss) excluding income tax (benefit)
provision, interest (income) expense, depreciation and amortization, 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 and tax receivable agreement
liability remeasurement (benefit) expense. 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:
(As Revised) (As Revised)
Three Months Three Months Nine Months Nine Months
Ended Ended Ended Ended
September 30, September 30, September 30, September 30,
(In thousands, except percentages) 2022 2021 2022 2021
Net earnings (loss) $ 26,405 $ (10,385 ) $ 45,122 $ 295,654
Add back:
Income tax (benefit) provision 1,618 280 5,756 (437,122 )
Interest (income) expense 6,866 5,676 18,446 18,861
Depreciation and amortization 19,755 27,022 73,835 80,882
Stock-based compensation expense 37,175 23,763 77,179 99,502
Employer costs related to stock-based
compensation (1) 431 2,438 1,628 2,438
Litigation costs, net of insurance
reimbursements (2) 249 2,019 4,089 3,794
Foreign exchange (gain) loss (3) (1,551 ) (2,011 ) (6,050 ) (6,042 )
Changes in fair value of interest rate
swaps(4) (4,774 ) (46 ) (18,404 ) (2,789 )
Transaction and other costs(5) 2,705 2,208 6,869 21,630
Changes in fair value of contingent
earn-out liability (27,004 ) 5,221 (46,399 ) 77,659
Changes in fair value of investments in
equity securities (38 ) (14 ) (38 ) (333 )
Tax receivable agreement liability
remeasurement benefit (6) - (1,687 ) - (1,687 )
Impairment loss (7) - - 4,388 -
Adjusted EBITDA $ 61,837 $ 54,484 $ 166,421 $ 152,447
Net earnings (loss) margin(8) 11.4 % (5.2 )% 6.8 % 53.4 %
Adjusted EBITDA margin 26.6 % 27.4 % 25.1 % 27.5 %
Net cash provided by (used in) operating
activities $ 81,769 $ 20,257
Less:
Capital expenditures (11,311 ) (9,388 )
Free cash flow $ 70,458 $ 10,869
Operating cash flow conversion 181.2 % 6.9 %
Free cash flow conversion 42.3 % 7.1 %
(1)
Represents employer portion of
(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 on interest rate swaps.
(5)
Represents transaction costs related to acquisitions and our offerings (IPO, the Reorganization and the secondary offering) such as legal, accounting, advisory fees and other related costs. Amount for the nine months endedSeptember 30, 2021 also includes a loss on debt extinguishment related to the repayment of$200.0 million under the Incremental Term Loan Facility. Amounts for 2022 also include employee-related restructuring costs directly associated with our decision to discontinue our operations inRussia including severance benefits, relocation and advisory fees.
(6)
Represents changes in tax receivable agreement liability due to tax rate changes and unrelated to exchanges of Common Units for Class A shares.
(7)
Represents impairment loss of a right-of-use asset related to our
57
--------------------------------------------------------------------------------(8)
Net earnings margin for the nine months ended
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 ofSeptember 30, 2022 , we had$365.1 million of cash and cash equivalents, a decrease of$4.1 million fromDecember 31, 2021 primarily due to the acquisition of Fruitz and the classification of restricted cash for cash held inRussia . 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 purchase an equivalent number of newly issued Common Units fromBumble Holdings , whichBumble Holdings used 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:
(As Revised)
Nine Months Nine Months
Ended September Ended September
(In thousands) 30, 2022 30, 2021
Net cash provided by (used in):
Operating activities $ 81,769 $ 20,257
Investing activities (81,031 ) (9,357 )
Financing activities (11,665 ) 152,924
Operating activities
Net cash provided by operating activities was $81.8 million for the nine months
ended September 30, 2022 , and $20.3 million for the nine months ended September
30, 2021 . This includes adjustments to net earnings (loss) for the nine months
ended September 30, 2022 and September 30, 2021 related to: deferred income tax
of $(6.5) million and $(443.1) million , respectively; change in fair value of
deferred contingent consideration of $(46.4) million and $77.7 million ,
respectively; stock-based compensation of $77.2 million and $99.5 million ,
respectively; and depreciation and amortization of $73.8 million and $80.9
million , respectively.
The changes in assets and liabilities for the nine months ended September 30,
2022 and 2021 consist primarily of: changes in legal liabilities of $(7.1)
million and $(45.6) million , respectively; and changes in accounts receivables
of $(5.2) million and $(5.0) million , respectively, driven by timing of cash
receipts.
Investing activities
Net cash used in investing activities was $81.0 million and $9.4 million for the
nine months ended September 30, 2022 and 2021, respectively. The change was
primarily due to the acquisition of Fruitz (net of cash acquired) of $69.7
million in the nine months ended September 30, 2022 . In addition, the Company
had capital expenditures of $(11.3) million and $(9.4) million in the nine
months ended September 30, 2022 and 2021, respectively.
Financing activities
Net cash provided by (used in) financing activities was$(11.7) million and$152.9 million in the nine months endedSeptember 30, 2022 and 2021, respectively. In the nine months endedSeptember 30, 2022 , the Company used$(7.4) million for shares withheld to satisfy employee tax withholding requirements upon vesting of restricted stock units, and$(4.3) million to repay a portion of the outstanding indebtedness under our Original Term Loan. In the nine months endedSeptember 30, 2021 , the Company received net proceeds of$2,361.2 million after deducting underwriting discounts and commissions, of which$1,991.6 million was used to redeem shares of Class A common stock and purchase Common Units from our Sponsor,$(205.0) million was used to repay a portion of the outstanding indebtedness under our Incremental Term Loan Facility and$(9.3) million was used for shares withheld to satisfy employee tax withholding requirements upon vesting of restricted stock units.
Indebtedness
58
--------------------------------------------------------------------------------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 . In connection with the Distribution Financing Transaction, inOctober 2020 , we entered into the Incremental Term Loan Facility (the "Incremental Term Loan Facility") 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 Initial Term Loan Facility (other than the applicable margin). A portion of the net proceeds from the 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 endedMarch 31, 2021 . The borrower under the Senior Secured Credit Facilities is a wholly owned subsidiary ofBumble Holdings ,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), 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 initial public offering. 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 . Following the$200.0 million aggregate principal payment of amount of outstanding indebtedness during the three months endedMarch 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 onJanuary 29, 2025 .
Tax Receivable Agreement
In connection with the IPO, inFebruary 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 initial public offering and 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 initial public offering, and assuming all vested Incentive Units were converted to Common Units and subsequently exchanged for shares of Class A common stock at the initial public offering price of$43.00 per share of Class A common stock) is approximately$2,603.7 million , which includes the Company's allocable share of existing tax basis acquired in this IPO, which we have determined to be approximately$1,728.1 million . In determining the Company's allocable share of existing tax basis acquired in the IPO, we have given retrospective effect to certain exchanges of Common Units for Class A shares that occurred following the IPO that were contemplated to have occurred pursuant to the Blocker Restructuring. The payments under the tax receivable agreement are not conditioned upon continued ownership of the Company by the pre-IPO owners. 59 --------------------------------------------------------------------------------
Contractual Obligations and Contingencies
The following table summarizes our contractual obligations as ofSeptember 30, 2022 : Payments due by period Less than 1 to 3 3 to 5 More than (In thousands) 1 year years years 5 years Total Long-term debt$ 5,750 $ 11,500 $ 617,000 $ -$ 634,250 Operating leases 5,561 8,444 8,804 4,521 27,330 Other 7,889 5,340 - - 13,229 Total$ 19,200 $ 25,284 $ 625,804 $ 4,521 $ 674,809 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$660.3 million and to range over the next 15 years from approximately$10.9 million to$58.5 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 "- 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 . In addition, we entered into a contingent consideration arrangement for an earn-out payment of up to$10 million in connection with ourJanuary 2022 acquisition of Fruitz. 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 ofWorldwide Vision Limited is dependent upon the achievement of a specified return on invested capital by our Sponsor and our payment to Fruitz is dependent upon the achievement of certain net revenue targets. See Note 6, Business Combination, for additional information on the Fruitz acquisition. InSeptember 2022 , the Company entered into an agreement for third-party cloud services. The Company is committed to pay a minimum of$7.1 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$7.1 million in spend, they will be required to pay for the difference between the sum of fees already incurred and the minimum commitment. InOctober 2022 , the Company entered into a lease termination agreement for itsMoscow office. The reduction in future lease payments is not reflected in the table above.
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 Annual Report on Form 10-K for the year endedDecember 31, 2021 . There have been no significant changes to these accounting policies and estimates for the nine months endedSeptember 30, 2022 , except as described below. Restructuring charges, associated with office closure or exiting a market, consist primarily of severance, relocation, right-of-use asset impairment and other related costs. The Company evaluates the nature of these costs to determine if they relate to ongoing benefit arrangements which are accounted for under ASC 712, Compensation - Nonretirement Postemployment Benefits, or one-time benefit arrangements which are accounted for under ASC 420, Exit or Disposal Cost Obligations. The Company records a liability for ongoing employee termination benefits when it is probable that an employee is entitled to them and the amount of the benefits can be reasonably estimated. One-time employee termination costs are recognized when management has communicated the termination plan to employees, unless future service is required, in which case the costs are recognized ratably over the future service period. All other related costs are recognized when incurred. See Note 9, Restructuring, for additional information.
Related Party Transactions
For discussions of related party transactions, see Note 16, Related Party Transactions, to the condensed consolidated financial statements included in "Item 1 - Financial Statements (Unaudited)".
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