Rumble Q1 2023 Earnings Call Transcript

Quartr
Provided by Quartr
May 15, 2023

There are 6 speakers on the call.

Operator

Ladies and gentlemen, greetings, and welcome to the Rumble First Quarter 2023 Earnings Conference Call. All participants will be in listen only mode. After today's presentation, there will be an opportunity to ask questions. Please note, this event is being recorded. It is now my pleasure to introduce your host, Shannon Devine, Investor Relations for Rumble.

Operator

Please go ahead.

Speaker 1

Thank you, operator. I'm here today with Chris Pawlowski, Founder, Chairman and CEO, Rumpel Brandon Alexandroff, are the CFO and Tyler Hughes, the COO. A press release detailing our Q1 2020 results was released today and available on the Investor Relations Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates or other information that might be considered forward looking. All forward looking statements are made only as of the date of this webcast and should be considered in conjunction with the cautionary statements in our earnings release and the risk factors included in our filings with the SEC. Future company updates will be available via Press releases and updates via the company's identified social media channels.

Speaker 1

I will now turn the call over to Rumble Founder, Chairman and CEO, Chris Pavlovsky.

Speaker 2

Thank you, Shannon. Hello, everyone. From our second acquisition to Mega Creator signings, you may have observed today is an incredibly eventful day at Rumble, which I'm excited to break down. I want to start off with what I think is one of the most historic moments in in the quarter were not in the past few weeks building off the top creators like DJ Akademiks and Jitian, Rumble pulled off the impossible. Rumble is not just a leader in political content, will now also lead in culture.

Speaker 2

The number one YouTube gaming streamer in 2022 and the single largest U. S. Gaming streamer, I show speed is now coming to Rumble. It doesn't stop there. We also announced the number one subscribed Twitch streamer in February, Kai Sanat will also be coming to Rumble.

Speaker 2

I'm not speaking about creators who are ranked number 2 or 3 on the world's largest platforms. I will reiterate both are number 1 on their respective platforms. No one is bigger at what they do and now they are launching a show on Rumble. If you're not familiar with iShow Speed and Kaizenat, don't worry, your kids are and so are advertisers. The gravity and implication of this event are more than meets eye.

Speaker 2

I've been personally in the trenches working to obtain new talent and Rumble was not the only platform bidding on these creators. Are surgical moves in launching Rumble Sports, then UFC and followed by DJ Akademiks and Jidian joining Rumble solidified our deal with Speed and Kai. We think they both see the writing on the wall and realize Rumble is the future for all verticals of content, politics, sports, and now with their help, Rumble will move to establish itself as a leader in culture. I've never been shy about our strategy. Rubble needs to have all verticals of content if we want to beat Big Tech.

Speaker 2

For the past few years, we've been heavily reliant on political content, Which is dictated by news cycles and elections. In the past few months, our team has done what many doubted we could do. We have clearly grown far beyond the perception of only having political content. These moves will make us less dependent on political news cycles and elections, which and effective stability of KPIs. With respect to Q1 KPIs, our monthly active users or MAUs, which is derived using Google Analytics for the quarter were $48,000,000 up 17% compared to $41,000,000 in the Q1 of 2022.

Speaker 2

Historically, Rumble has seen dips in MAUs on a quarter to quarter basis and in Q1, we saw a notable decline over Q4. This was primarily due to the incredible over performance of Q4, particularly around the U. S. Midterm election cycle. For example, creators like Steven Crowder, who saw record traffic around Election Day produced limited content in the 1st 2 months of 2023.

Speaker 2

Additionally, our 4th quarter traffic was driven by a large number of users who were new to Rumble, many of whom did not return to the platform in Q1. This was not unexpected. In our history, we have experienced other significant quarterly increases in users, which result in only partial retention of users going forward. As previously mentioned, we are diversifying our content library by seizing the opportunity to invest in new content categories like gaming, live sports and culture. Content from top names in the streaming community like Kai Sanat, iShow Speed, AkademiX, and Jitian will lead to more returning users who are loyal unless driven by single news events or election cycle.

Speaker 2

Average estimated minutes watched per month, which is based on bandwidth consumption and our best estimates of video resolution quality and encoding parameters were $10,800,000,000 for Q1. This represented a 3% increased when compared to $10,500,000,000 in the Q1 of 2022 and a small decline from the 11,100,000,000 minutes watched per month in the Q4 of 2022. We believe our consumption is driven by new product designs and features. We also saw connected TV applications grow as more users migrate to watch live streams and shows on big screens. These connected TV users consume enormous amounts of content.

Speaker 2

So far, we are seeing roughly 100 minutes of usage per connected TV user per day. Additionally, another major factor in driving consumption in our latest signings are an example of that. I believe live sports, live streaming and live podcasts via connected TV will slowly become more desirable than live cable television, especially with younger generations. This brings me to our 2nd major acquisition. I'm very proud to announce that Rumble has acquired Collin.

Speaker 2

In the beginning of this year, our team was presented with the unique opportunity to acquire Collin, a are in the same store as we evaluated the call in platform and exceptional engineering talent building the platform, it quickly became evident that acquiring Collin would put us in a position to greatly accelerate our product roadmap and enable us to build are in a world class live streaming experience. For those of you who may be unfamiliar, Colin was founded by David Sachs, are one of the first employees at PayPal as their COO and former colleague of Peter Thiel, one of our first outside investors. David is an ardent supporter of Rumble's mission to protect the free and open Internet. In fact, David's venture capital firm, Kraft Ventures, became a shareholder of Rumble through Rumble's acquisition of Locals, in which Craft Ventures was an early investor. The Colin app focuses on providing outstanding live streaming and podcasting capabilities designed for creators to simplify are in the range of production and editing as well as supporting live audience participation.

Speaker 2

Unique to call in is the concept of rooms, which allows for the instant launching of audio and video content with an attractive and easy to use interface for both creators and audiences. As I have continually emphasized, estimated consumption is our most important KPI given that consumption reflects user engagement, which in turn drives monetization. Call in brings features and functionality to Rumble, which will enhance user engagement and further empower our creators to generate more of their best content, thus driving monetization. While there is work ahead of us to integrate the call in experience into Rumble, I can say confidently that we are now in a better position than ever to deliver on the vision to provide creators with a world class experience. It is important to note that this acquisition is another manifestation of our mission and commitment to authenticity and to protect the free and open Internet.

Speaker 2

I am honored that as part of the acquisition, David Sacks, a devoted supporter of free speech in the Creator Economy will be joining our Board of Directors later this year in the second half of June. To conclude, as evidenced by our Q1 in today's announcement, it's clear that we are becoming unstoppable as we continue executing against all components of our original growth strategy. After the acquisition of Collins and being able to attract the world's top streamers like Kai Sanat and NiShow Speed, there is no doubt in my mind that Rumble are executing on all fronts in ways unimaginable to many, and I remain confident that we will deliver on our plan. With that, I'll turn the call over to our CFO, Brendan Alexandrov. Thanks, Chris.

Speaker 2

I'll now take

Speaker 3

you through our Q1 financials at a very high level Before turning the call over to the operator for Q and A, from a top line perspective, we reported quarterly revenues are in the range of $17,600,000 for Q1 2023. This compares to $4,000,000 for Q1 2022 And was primarily driven by an $11,800,000 increase in advertising revenue year over year. The increase in advertising revenue was driven by an increase in consumption as and our online advertising management exchange, which we call Rumble Advertising Center or RAC, both of which we started to build and test in the second half of twenty twenty two. Our approximately $1,800,000 increase in licensing and other revenue compared with Q1 2022 was driven by tipping features within our platform as well as certain cloud subscription, platform hosting fees and provision of one time content. As a reminder, Cost of services includes all programming and content costs related to payments to content providers, including amounts paid to creators based on revenues generated, as well as additional costs related to incentivizing top creators to promote and join our platform.

Speaker 3

Cost of services also includes 3rd party service provider costs such as data center and networking, staffing costs directly related to professional service fees and costs paid to publishers. Cost of services for the quarter were $26,000,000 compared to $3,700,000 a year ago. The increase was due to an increase in programming and content costs of $21,100,000 hosting expenses of 500,000 and other service costs of $700,000 Moving to our cash position, we ended the quarter with $326,300,000 in cash, Cash equivalents and marketable securities compared to $338,300,000 as of December 31, 2022, Representing a $12,000,000 use of cash in the Q1. Cash, cash equivalents and marketable securities consists of cash on deposit with banks and amounts held in money market funds, treasury bills and term deposits. As we have consistently stated, we intend to use a substantial portion of funds that we have raised to acquire content by providing economic incentives, including minimum guaranteed earnings to a limited number of content creators, including sports leagues.

Speaker 3

This content acquisition strategy will allow us to enter key content verticals and secure top content creators in those verticals before we have full monetization capabilities in place. Our present focus is to grow users and usage consumption and experiment with monetization levers, which may not maximize profitability in the immediate term, But which we believe will position our business for the long run. As a result, we expect that this strategy will require us to consume a significant portion of our capital raised. The contracts we have signed to date obligate the company to spend approximately $164,000,000 related to programming and content. Of that amount as of March 31, 2023, we had entered agreements with a minimum contractual cash commitment of 62,000,000 subsequent to the end of the quarter, we entered into additional agreements with a minimum contractual cash commitment of $102,000,000 A significant amount of these minimum contractual cash commitments will be paid over 12 months to 48 months commencing in 2023.

Speaker 3

In addition to the minimum contractual cash commitments, we have programming and content agreements that have variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate. However, these costs could be substantial. That concludes my prepared remarks. Before I turn the call over to the operator, I invite you all to join Chris this evening at 7 pm Eastern Time in an exclusive post earnings interview with Matt Kors to be streamed live on the Matt Kors Rumble channel.

Speaker 3

I will now turn the call over to the operator to open up the line for questions from our covering analysts.

Operator

We will now begin the question and answer session. Our first question comes from Jason Helfstein with Oppenheimer. Please go ahead.

Speaker 4

Thanks. Hello, everybody. Three questions. The first, can you give us any commentary on MAU For engagement quarter to date in the second quarter and how that's compared versus the Q1? 2nd question, Just talk about the impact of Steven Crowder's content broadly on the platform.

Speaker 4

It does sound like his hiatus in the Q1 was Obviously, pretty material for engagement, but just how you think about his broader impact on the platform with him coming back and kind of when you think that when that happened? And then just we've gotten some questions on the call in deal. Is this cash stock both? And when will we get kind of details on that acquisition? Thank you.

Speaker 2

Thanks, Jason. This is Chris. So on the first question with respect to Q2, we're not providing any guidance Your consumption with respect to Q2. On the second question on Steven Crowder, so Steven Crowder was on the platform and as everyone probably already knows in Q4 hit Some major, major numbers on his midterm election streams that were very significant to our platform. And he took a couple of months break and didn't come back till late March in Q1.

Speaker 2

And what we saw when he came back, he came back in a different capacity to our platform. He came back at the entire subscription business for Steven Crowder is now on Rumble itself. And we announced, I think, shortly At that time that he accumulated over 57,000 paying annual paying subscribers in the 1st 10 days of his announcement of coming back and coming to Rumble and that was prior to his show even starting. But I also mentioned on the previous earnings call that when he did come back, he was bigger than ever for us. His numbers have been are very strong as you can see when you go to his streams.

Speaker 2

And he's moved a large segment of his viewership from YouTube over to Rumble in that period. Within the with the 3rd part, I'll let Brandon.

Speaker 3

Yes. Hey, Jason. On the call in deal, so that just closed recently, so during the Q2. So more information will be disclosed As part of the Q2 10Q.

Speaker 4

Thank you.

Operator

The next question is from Tom Forte with D. A. Davidson. Please go ahead.

Speaker 5

Great. So first off, Chris, I look forward to the call tonight at 7. I learned a lot from the last quarter's call. All right. So two questions.

Speaker 5

I'll go one at a time. When it comes to your user interface, where do things stand with your Android app, your iOS app And your OTT apps, what inning are we in for each one when it comes to usability versus your long term goals?

Speaker 2

Thanks, Tom. So this is Chris. The I would say that we're still in the very early innings right now when it comes to the apps. We've made tremendous progress on our iOS app and our Android app and then the OTT apps. We'll be launching the Samsung app very shortly now.

Speaker 2

So and then we're looking to launch also on Xbox and PlayStation in the coming months. So we're pretty excited with the progress. The new interface is up on all the apps are now across OTT and mobile. But I would still say it's still very early innings. The reason I say it, there's a lot of product features that we can still be adding.

Speaker 2

Right now, it's a lot of design changes have happened, but we still need to add a lot of product features into those OTT apps and mobile apps. So still very early innings and it's something that I plan to improve like through for many, many years going forward as you can imagine things evolve quite a bit.

Speaker 5

Great, thanks. And then for my second and final question,

Speaker 3

We don't

Speaker 5

have to talk about Tucker Carlson specifically. Can you discuss why your platform may be more effective And then others for content creators to build an audience and monetize it, especially versus YouTube, Twitch and Twitter.

Speaker 2

Absolutely. So I would say one of the most compelling reasons to come to Rumble is authenticity. On Rumble Rumble is the only place where you can be truly authentic when creating content. And when being authentic, you just naturally create more compelling content. So I believe we're a platform positioned to have the best content in the world Because we're not people are not stifling their speech and people are not holding back.

Speaker 2

They're being truly authentic. They're being truly themselves and being very real. When it comes on actual products, I also think we have a major advantage on the product side, especially on the subscription side after the acquisition of Locals. And we've are in the Locals. And we've kind of demonstrated that with Steven Crowder.

Speaker 2

When he came to on our platform, he brought his entire mug club subscription business to Rumble, which is sitting on the Locals platform and we had enormous success out of the gate like before he even started as I mentioned to Jason, He acquired 57,000 plus paying annual paying subscribers with and that was that only took 10 days and that's using the subscription platform that sits on local. So I think we have a real competitive advantage Both on authenticity and on the actual product, the locals product for subscription, I think that as a creator, you can monetize with that subscription product better than anywhere else you can.

Speaker 5

Great. Thanks for taking my questions.

Speaker 2

Thank you.

Operator

The next question is a follow-up from Jason Helfstein with Oppenheimer. Please go ahead.

Speaker 4

Hey, just a follow-up on advertising and RAC. So, ARPU, depending on how you want to define it, was are kind of a bit better than we thought. How should we think about Kind of milestone you reached with RAC in the Q1 and kind of how we should think about what's the next milestone with your ad server? Thanks.

Speaker 2

Hey, Jason, this is Chris again. With respect to RAC, we're still in beta on that. But what I'm really excited about and you'll hear a lot more about in the next week or 2 here is that we're going to be launching the alpha version of our Live Read marketplace, which I'm are extremely excited to start testing. That product is fully built and ready and we should start rolling it out and testing with Creators by the end of the month or by at least by early June, but that product is ready now and I'm very excited about that and the prospects of that.

Operator

This concludes our question and answer session and the conference has also now concluded. Thank you for attending today's presentation. You may now disconnect.

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Earnings Conference Call
Rumble Q1 2023
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