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Bumble went public using the Up-C structure and generated billions in deferred tax assets. At the end of last year they repurchased the TRA that held the claim on 85% of those tax savings below fair value. As a result bumble has two distinct wholly owned tax assets; traditional NOLs and billions in DTAs, I'll focus on the latter as it's much larger.
In Q3 the company believed they are likely to save $493M in taxes from the banked step-up losses. They go on to say to the extent they can realize additional tax benefits they would record an additional $273.3M liability for a total of $692.4M in potential TRA payments. This TRA was repurchased for 186M in Q4 and now these TRA tax savings will be converted on a flat line basis to cash flow over the next 10-15 years. Bumbles deferred tax assets as a whole are worth upwards of 814.6M in tax savings which is almost twice the total equity value of the business and far in excess of the 14.19M value they are carried at on their balance sheet before this favorable liability elimination.
The bulk of these DTAs expire in the next 11 years. If we discount the [419.1M - 692.4M](https://substackcdn.com/image/fetch/$s_!8TKE!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Faaec0313-0c1d-4ce8-a842-f0c0acccde63_2378x1115.png) value of the repurchased TRA at 10% on a straight line basis over 11 years the conservative present value of the TRA portion of the asset is $247.5M - $408.8M. Essentially Bumble got a discount of roughly 25-56% when they paid 186M for the TRA on November 6th. This valuation assumes Bumble can roughly maintain taxable income above ~$90M on the low end and ~$250M on the high end for a decade straight, which may not happen.
After stripping away goodwill impairments analysts expect FY 2025 taxable income of $144.4M-$151.4M. The present value estimate of the TRA value doesn’t include subsequent tax asset creation from Whitney Wolfe Herd exchanging her remaining Buzz Holdings for Bumble inc. A-Shares. The value of this exchange is dependent upon the stock price when they are converted and has potential to be quite significant in the realm of hundreds of million if the stock rebounds in the following years.
The knock-on effect of clearing this $400M non-interest bearing liability was a S&P ratings upgrade from B to B+ closer to the BB- rating they hold with Fitch. This likely allowed them to knock 50 basis points or more off their debt; a refinance announcement is expected during the Q4 earnings on March 11th.
**Evaluating the Underlying Bumble Business**
Bumble has pretty good geographic diversification 55% of total revenue in 2025 came from outside the US. Despite what the share price chart suggests the underlying business has markedly improved from its IPO. They now make more in operating income in 3 months than they made in the first 3 years that followed their IPO.
Heterosexual dating apps are effectively a duopoly, if you want to find a wife from the comfort of your iPhone you are either paying Match or Bumble. This concentration combined with the value proposition of finding a wife provides these firms tremendous pricing power and healthy operating margins. Match group fills much the same role as Jupiter, protecting earth by absorbing smaller comets that might otherwise hit us. By purchasing most of the smaller competitors in the dating space they keep the dating app price war a friendly affair between Bumble and Match.
Bumble is in the midst of a house cleaning. They are attempting to prune bad actors, and emerge with a cleaner better product - a pool of genuine profiles that people will be prone to pay for. We can see some evidence to their success in the slight uptick in ARPPU in the face of a shrinking userbase.
In the interim KPI’s are falling and Bumble hemorrhaged 18% of their paying users in Q3 2025 compared to the year ago period. It’s not all bad news as lapsed users, while a worrying sign, must simultaneously be valued as an asset of sorts. The cost per install for new users is 4x higher than the cost to retarget return users and the conversion rate for return users to payers is 50% higher. Inactive users are a valuable pool and yet people tend to overvalue software with growing users and undervalue legacy software. This ignores the favorable economic advantage of retaining and retargeting users.
Software companies are experiencing major selloffs as they face questions over long term viability. Bumble’s value lies not in its code base but its critical mass of users, particularly women as it maintains a higher percentage of women than both tinder and hinge. Furthermore the free offerings from Bumble, tinder, and hinge are tough to compete with which makes amassing a formidable user base marketing intensive and thus prohibitively expensive for any upstart competitors. The moat certainly appears to be shrinking for everyone in the cloud software subscription business but I think the incumbent dating apps are better positioned than most. Priced near 2x forward free cash flow anything short of immediate miserable failure should amount to a win for stockholders at current levels.
In June Bumble laid off nearly one third of their workforce. The move is estimated to save them 40M a year. This should lower annual dilution from SBC. Historically, Bumbles SBC has been excessive. The return of founder Whitney Wolfe Herd as CEO after a 14-month hiatus came with a price tag. She was awarded $9M in SBC and her new CFO was handed $12M. You don’t become the youngest self made female billionaire by not looking out for yourself. Their sign-on bonuses alone consumed more than half of what they saved by cutting 240 jobs, not what I’d call moral management. Stock based compensation is a silent killer and it need to be monitored here.
Despite the sky high valuations bumble reached, the highest price they ever paid to repurchase shares was $16.20 per share in 2023. My own DCF calculations put fair value today within striking distance at $15.80. Given that the share price traded as high as $78.89, staying above $50 for most of 2021, it’s encouraging that they never repurchased shares at those inflated prices. Subsequent share repurchases of $379.3M from Q3 2023 to Q3 2025 averaged $9.14 per share, retiring another 41.5M shares. In total $400.2M was spent on share repurchases and 50.1M was left in their buy back program heading into Q4 2025. I wouldn’t be surprised if they already exhausted buybacks in Q4 leading to a further ~7.5% reduction in shares outstanding.
The thesis for Bumble is simple: it’s a SAAS business trading near 2x cash flow and it isn’t about to implode. The hidden tax asset is worth the price of admission - if they maintain the current level of profitability the present value of the tax asset is worth more than the market cap of the company. Bumble has a decade of tax free earnings ahead making them a prime acquisition target. The purchase of their tax receivables agreement has increased their expected cash flows which are already at all time highs.
Fair value today conservatively sits near $15.80 per share. None of my base case assumptions to achieve this are particularly heroic. A return to moderate 5% revenue growth following 2 years of stagnation and a 9x EV/EBIT terminal multiple imply a future share price of $43.48 and a $6.5B market cap by 2031. Well below the 7.7B market cap it achieved the day of it’s IPO.
This company has problems; it’s not the industry leader, users are in decline, they had expensive debt, ARPPU has been flat over 5 years up just 2.5% from its avg. of $22.10, they have a terrible M&A track record, their largest shareholder Blackstone is exiting: already selling over $100M in stock for $6.26 per share, and the business maintains a tax structure and identity-based voting terms that gives Amber Wolfe Herd preferential treatment and 10:1 voting control until it sunsets on February 16th, 2028. Any one of those factors may send this to the no pile for most investors but in my estimation it doesn’t justify this rock bottom valuation given their tax assets, tailwinds, and price to prospective cash flows.
**Catalyst**
Bumble can sustain high margins thanks to their tax shield, TRA elimination, and the rapidity at which they can reduce debt/interest. They have a fourth lever with D2C billing. Bumble has just scratched the surface of D2C revenue which can save bumble 27% in fees thanks to the Epic Games lawsuits. If Bumble moves a quarter of their 1B in revenue off-platform offering customers 10% discounts that’s an extra $42.5M/year hitting their bottom line tax free.
March 11th Q4 earnings includes a significant one time gain of $233M in net earnings roughly $1.55 EPS and the elimination of 1/3rd of total liabilities. That should turn heads as 2026 cash flows allow for massive debt reductions and share repurchases throughout the year.
**TLDR:** $450M Market Cap + ~$400M in Net Debt as of today - Cash flowing 200M a year and if you buy today you can save $814M in taxes over the next decade. This is a desirable acquisition and a no brainer at this price even if you expect revenue growth to decline double digits for years.
[Link to my DCF](https://substackcdn.com/image/fetch/$s_!ryhZ!,f_auto,q_auto:good,fl_progressive:steep/https%3A%2F%2Fsubstack-post-media.s3.amazonaws.com%2Fpublic%2Fimages%2Faae81eeb-6a72-4dde-80a7-9c1baff59dff_2455x1025.png)
[Link to article with charts](https://deepvalueflow.com/p/bumbles-billion-dollar-tax-shield)