Bumble’s Multi-Billion Dollar Decline & Crocs Steps Up

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John Crotteau (0:32)

Bumble swiped right on being taken private. We have the latest on the state of online dating.

Hanna Horvath (0:37)

And we head back to the disco to see what moves Wall Street analysts are making this week.

John Crotteau (0:41)

For Friday, October 16th, it's Brew Markets Daily. I'm John Crotteau.

Hanna Horvath (0:44)

And I'm Hanna Horvath. Let's get moving and grooving.

John Crotteau (0:49)

All right, Hanna, it is great to have you here in studio on a Friday. And for several weeks, we've had the topic of dating apps on our board for potential conversations.

And this week gave us the opening we were looking for into the world of swiping with the report that Bumble is being taken private. Bumble, of course, the dating app that initially made its name by taking a novel approach to connections, namely that women had to make the first move in striking up a conversation with that app. Well, years later, that idea has been ditched and the company is being acquired for billions less than it stood at the height of its valuation.

Hanna Horvath (1:26)

Yeah, and all of this is kind of begging the larger question, which is, can any of these dating apps survive in the age of swipe fatigue and AI matchmaking?

John Crotteau (1:34)

I certainly have my opinions. I think you do as well. But let's start with some details out of that Bumble deal. It was announced that Ithaca Holdings is going to pay $6.05 a share in cash, plus potentially $300 million of net debt for a total near $1.3 billion for Bumble. That's 138% over where the stock closed just last Friday and includes a 49% jump that we saw earlier this week Monday, just on rumors of the deal.

Ithaca was founded this year by Ravi Gupta, a Sequoia partner and former Instacart CFO, and John Hedgman most recently met as chief revenue officer.

The two of them will be co-CEOs of a company and its founder, Whitney Wolfherd, will, quote, remain actively involved with Bumble. But as of this point, we haven't heard what her title may or may not be. So what is this company spending a billion dollars on, Hanna?

Hanna Horvath (2:31)

Yeah, I think that's a good question, a billion dollar question, so to say. It's certainly not a gross story, at least right now. And I think that's kind of what is so remarkable about this deal. When Bumble went public in 2021, it was like a darling. It was one of the hottest IPOs of the year.

At one point, the company was valued around 14 billion dollars, and now, just five years later, it is being sold at a fraction of that. And the actual business has been struggling for quite a while. Revenue fell 15% last quarter to about 210 million dollars, while the number of paying users have dropped more than 16%.

And yet, Bumble is still generating a decent amount of cash. It had a 34.6 adjusted EBITDA margin last quarter and generated about 125 million in free cash flow during the first half of this year. So I can see the appeal for a buyer. You have this very recognizable brand, millions of users and an existing business that is generating cash. But can the new owners figure out how to get people to actually want to use it again? And Bumble's hurdles are not in isolation. I should point out, they are kind of the effects of this broader dating app ecosystem and changing cultural attitudes around dating. Let's take a look at one of their main competitors, which is Match Group, which owns Tinder, Hinge, bumble.com, Plenty of Fish, OkCupid, and more than a dozen other named brands. Match did about $853 million in revenue last quarter, roughly four times Bumble's revenue.

John Crotteau (3:50)

Right, but Match has had a bit of a rebound in share price this year, up 30%.

But the stock is down 73% in the last five years. And none of these dating companies are flourishing, as you mentioned. And they have acknowledged that young people are looking for something different from their dating lives. And the apps have all tried different schemes or gimmicks. But there is one exception to that loss, which is Hinge. Its revenue actually grew 22% last quarter.