Rumble Q4 2023 Earnings Call Transcript

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March 27, 2024

There are 6 speakers on the call.

Operator

Greetings. Welcome to Rumble Inc. 4th Quarter 2023 Earnings Call. At this time, all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Operator

Please note this conference I will now turn the conference over to Shannon Devine, Investor Relations. Thank you. You may begin.

Speaker 1

Thank you, operator. I'm here today with Chris Toblowski, Founder, Chairman and CEO of Rumble Brandon Alexandroff, the CFO and Tyler Hughes, the COO. A press release detailing our Q4 and full year 2023 results was released today and available on the Investor Relations section of our company website. 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.

Speaker 1

Future company updates will be available via press releases and company updates via the company's identified social media channels. I will now turn the call over to Rumble's Founder, Chairman and CEO, Chris Pawlowski.

Speaker 2

Thank you, Shannon. To start, I want to talk about 2023, our building year as a company. In addition to successfully diversifying our content library with several key signings across sports, comedy and entertainment, we were relentlessly focused on delivering on our product commitments. Let me recap this extraordinary year for our world class product and engineering teams. 1st, we completely transformed the user experience on rumble.com, launching a fully redesigned user interface across all major viewing platforms, while integrating our premium subscription service locals.com to offer more robust monetization opportunities for creators.

Speaker 2

2nd, we acquired Kallen in May of last year, which gave rise to the beta launch of our new patent pending live streaming tool Rumble Studio, which is an incredible product that will lay the foundation for future monetization. 3rd, we built and launched Rumble Advertising Center, which we often call RAC. I'm excited to say within the last 90 days RAC began deploying pre roll video ads across our mobile apps, while we are also expanding our inventory by onboarding other publishers to the network. 4th, on top of all this, we built the infrastructure necessary to support rumble.com, laying the foundation for Rumble Cloud, which we publicly launched just 2 weeks ago. A completely revamped user interface and integration of a major video platform, a novel live streaming tool, an advertising network and a cloud all in 1 year.

Speaker 2

Today, what we have is a beautiful business with 4 top of the line products. Our team has worked tirelessly around the clock to build the products and services our audience desires. And I'm not only in awe of these products, but the team behind the colossal effort. What we have built is essentially a mini Google. And when you look at how long it took Google to build their offerings and the capital investment required, it really puts everything into perspective.

Speaker 2

Google purchased DoubleClick for 3,000,000,000 dollars This compares to the Rumble Advertising Center. Google purchased YouTube for $1,650,000,000 back in 2006, which compares to the Rumble video platform. Google has also invested 1,000,000,000 into Google Cloud, which compares to our Rumble Cloud. And by the way, we did all of this with fewer than 250 people. In terms of our expansion into the cloud business, it's important to understand why our business was so well positioned to launch our cloud offering.

Speaker 2

Since day 1, we have not relied on 3rd party cloud platforms. We've built and subsequently scaled our core video platform, rumble.com on bare metal since 2013. It really hit me when Parler got shut down, especially because big tech platforms had more violations than Parler did, but Parler was the only company that had severe consequences. The gatekeeper in this case was the cloud provider, Amazon AWS, who ultimately turned off the lights. Parler had no recourse and had no options to get back online.

Speaker 2

We realized that building Rumble's infrastructure was existential to our business, so we decided to do it in 2021. This undertaking allowed us to build the full stack, which not only allowed us to protect our business, but also enabled us to enjoy the favorable long term economics of running our own infrastructure and avoiding being locked in to the unfair pricing of the incumbent hyperscalers. This infrastructure serves as the backbone that powers rumble.com and has laid the technical foundation for Rumble Cloud. While building our own infrastructure was critical to protect Rumble, it also presented an incredible opportunity to leverage the size of rumble.com and build out a cloud offering at scale to address a market saturated by customer pain points related to vendor lock in strategies, unfair pricing, mistrust with data and privacy, complexity and the acts of censorship. With the launch of Rumble Cloud to the public earlier this month, the market now has an exciting new option from a cloud provider who is 1st, devoted to protecting a free and open Internet and will not turn off the lights for any kind of subjective and arbitrary reasoning.

Speaker 2

2nd, built on the latest generation hardware capable of delivering top network speeds and quality. And third, disrupting the market with our pricing strategy. Our vision is to provide the most predictable pricing to the market so businesses can regain control of their IT spend. Just as Rumble has taken market share from YouTube, we plan for Rumble Cloud to do the exact same in the cloud market going after the excess profits and revenues at the infrastructure layer currently cornered by Big Tech. We are running on the singular highway of the free and open Internet and it's an uncancelable highway.

Speaker 2

When Big Tech goes down, we remain untouched. This position secures Rumble and by natural extension, our ecosystem of users, creators, advertisers, subscribers, publishers, cloud partners and shareholders in a massive way while protecting the data independence of businesses. We are offering an opportunity to all companies. To support our go to market strategy in the mid market and enterprise space, we recently announced partnerships with Kinship, a premier leader in managed IT services and solutions with 7,000 employees, allowing Rumble to meaningfully scale and accelerate our go to market approach and ACP Creative IT, strengthening our focus on North America, while expanding our offering with a wider range of complementary services and solutions using the cloud infrastructure. While we launched the high performance compute tiers with dedicated vCPUs, we will expand our offering to include lower cost tiers with shared vCPUs, which will better serve developers and small businesses.

Speaker 2

As with all of our products, we will iterate as the market demands, but at this moment, we feel that the medium to large enterprise customers is where significant opportunity exists. Although purchasing decisions for these companies can take time, we are encouraged by the aforementioned partnerships with Kinship and ACP Creative IT and the entry level of interest among mid market and enterprise prospects. Today, the focus of the company is transitioning from building the products to generating revenue. Now that our products are in full production, we anticipate seeing sequential revenue growth beginning in the second quarter, which much of this revenue growth weighted towards the back half of twenty twenty four as our monetization products begin to ramp. In particular, our confidence in this outlook is bolstered by the strong results we are experiencing in RAC throughout the month of March.

Speaker 2

The Rumble Way begins with the right assets and products. Over the last two years, we have held our core audience of 40,000,000 plus MAUs. And with this audience, we are able to hit our future revenue goals. To this point, it should be noted that our 4th quarter benefited from an outperformance in MAUs due to high profile sporting events such as street league skateboarding, which did extremely well, pushing MAUs to 67,000,000 for the quarter. Due to the nature of one off sporting events, this trend did not continue into the Q1 to date.

Speaker 2

Today, we have the right products in core offerings, fully positioned to scale and start generating incremental revenues. We have the audience to monetize with the appropriate products and keep in mind, we did this with fewer than 250 team members, while ending the year with north of $200,000,000 in cash on our balance sheet. We are competing against Big Tech on all fronts with the most dedicated team in an enviable market position to drive revenue. I'm the most driven and most excited I ever have been. The team is also incredibly motivated and I look forward to updating you as our amazing progress continues.

Speaker 2

With that, I'll turn over the call to our CFO, Brandon Alexandrov.

Speaker 3

Thanks, Chris. I'll now take you through our Q4 and full year financials at a very high level before turning the call over to the operator for Q and A. For the full year of 2023, we reported revenues of $81,000,000 an increase of 106% when compared to $39,400,000 in 2022. For the Q4, we reported revenues of $20,400,000 This compares to $20,000,000 for Q4 2022. The 2023 Q4 revenue reflects an increase in other services revenue of $3,500,000 offset by a decrease in advertising revenue of 3,100,000 dollars The increase in other services revenue was driven mainly by subscriptions, content licensing, tipping features and provision of one time content.

Speaker 3

Cost of services was $39,500,000 for the quarter compared to $23,500,000 for the Q4 of 2022 due to an increase in programming and content costs of $14,000,000 and an increase in hosting expenses and other service costs of 2,000,000 dollars For the full year, cost of services increased by $102,400,000 to $146,200,000 due to an increase in programming and content costs of $98,900,000 posting expenses of $2,700,000 and other service costs of 800,000 Moving to our cash position. We ended the year with $219,500,000 in cash, cash equivalents and marketable securities, compared to $267,000,000 as of September 30, 2023. We are sitting on sufficient cash to meet our ongoing capital needs. With our monetization assets coming online late in Q1, we are transitioning from manual processes with a small number of creators to automated processes that scale more easily and therefore yield more predictable revenue generation. 1st quarter revenues still largely reflect this volatility and as a result will be down slightly from the 4th quarter.

Speaker 3

However, with the benefits of improved automation, we expect to see a sequential quarterly increase in revenues beginning in the Q2. Specifically, this anticipated increase in revenues is supported by our experience with RAC throughout the month of March. Before I conclude, I want to reiterate what I stated on our Q3 earnings call. With our revenue engines coming online and our guaranteed creator commitments set to significantly decrease during 2024 2025, we continue to move materially towards breakeven in 2025. That concludes my prepared remarks.

Speaker 3

Before I turn the call over to the operator, I invite you all to join Chris this evening at 7 P. M. Eastern Time for an exclusive post earnings interview with Matt Kors to be streamed live on the Matt Kors Rumble channel. I will now turn the call over to the operator to open up the line for questions.

Operator

Thank Our first question is from Jason Helfstein with Oppenheimer and Company. Please proceed.

Speaker 4

Thanks everybody. So I'll ask like several questions and I'll go back in the queue and depending if there are other questions I could kind of ask them more. So maybe just talk about the drivers of the lower just some of the engagement drivers in the Q4. So as far as like the maybe weaker minutes, was most of that YouTube related or did some of that have to do with just less premium content from your paid creators? I'll just do them 1 at a time.

Speaker 2

Hey, Jason, this is Chris Pavlovsky. With respect to the uploaded hours, that definitely had a we had an impact when YouTube cut off the auto sync that we disclosed back in January, I think it was. So that definitely had an impact on hours uploaded. With respect to the estimated bandwidth consumption minutes watched based on bandwidth consumption, You'll notice that in the if you remember in Q3, we've been migrating over to our CDN. We continued that migration in the Q4 and that also had an impact.

Speaker 2

And if you recall, the that's an estimate based on bandwidth consumption. So the CDN had an impact on that. And also, in addition to that, the we our MEs were really strong based off of one off sporting events such as the Street League Skateboarding that did extremely well in the Q4 in December in specific.

Speaker 4

Okay. So yes, so the focus would be more MAU than Minit just given some those factors. And then, you beat our gross profit estimate, by a nice amount even on lower revenue, which would suggest like you manage content costs pretty well in the quarter. I mean just maybe, Brandon, can you talk a little bit about that? I mean, how much of that was you were able to manage it versus you just had less content that had minimum guarantees?

Speaker 4

And just just to talk about the dynamics on gross profit in the quarter? Thanks.

Speaker 3

Yes, sure. So just as a reminder of what the components are of cost of services, there's 3 main components. So the first one is the revenue share that we give to the creator. So for advertising, we share 60% of the revenue to the creator. So that's one component of cost of services.

Speaker 3

The second component, which at the moment is the largest component, are the guaranteed contracts that we're giving to those creators. And so as we scale, we expect those to decline over time. And the 3rd component of cost of services, which is the smallest amount relates to network hosting costs. So yes, I mean, we're continuing as we've said to focus on those minimum guarantee contracts. And as they come off of contract, the plan is that we don't have to renew those because as the monetization tools start kicking in, the creators will actually start earning that 60% ad revenue and we don't have to extend those contracts.

Speaker 4

And then I'll do one more and go back in the queue. So again, maybe give us an update on reducing creator guarantees later in 'twenty four and you've talked about meaningful progress towards breakeven in 'twenty five. So just given that EBITDA I think was better EBITDA and cash burn was better than I think we were looking for in the quarter. Just how should we think about, I guess, those metrics for the rest of this year? And are you willing to say if you're targeting positive EBITDA in 2025?

Speaker 3

Yes. I mean, our plan is to move materially towards breakeven in 2025. And as I said, it's coming from 2 main reasons. Number 1, we're turning on the monetization engine. So that's going to start kicking in.

Speaker 3

You'll see sequential growth starting in the Q2 of this year. So the revenue starts kicking in and then those minimum guarantee costs start declining through the rest of 2024 and into 2025, which allows us to get towards breakeven in 2025.

Speaker 4

Okay. I'll go back in the queue. Thanks.

Operator

Our next question is from Tom Forte with Maxim Group. Please proceed.

Speaker 5

Great. Thanks. Chris and team congrats on the quarter year. Like Jason and I have several, I'm going to ask 3 and then I'll get back in the queue as well. And I'll go one at a time.

Speaker 5

So, the first question I had was, Reddit is off to a very impressive start as a public company. Chris, I was wondering how you see the mission of Rumble is similar to Reddit and how you think it's different?

Speaker 2

Yes. So Reddit's been around for a very long time. When I look at Reddit and I compare it to Rumble, they're in a way it started a lot, I would say, 10 years ago. 1 of the original founders was a lot in common in terms of free speech and freedom of expression. But I think that's changed a lot as the business has changed over the last decade.

Speaker 2

But one of the things that kind of like stick out to me with Reddit is that I think they did like was it $400,000,000 in R and D, whereas with Rumble, our R and D spend and building the cloud and building the Rumble advertising center and building the video platform really kind of stands out in terms of what our team is capable of doing versus what a company that's been around for several decades almost now has been doing. So I see there's like heavy contrast there and I'm very prideful about that and what we've done with the size team that we've done and the amount of capital needed to get it done in comparison to Reddit.

Speaker 5

Great. And then my second question is historically you've experienced spikes in usage and engagement on your platform during elections. How should investors think about the potential for that to occur again this year with the upcoming presidential election?

Speaker 2

Yes. So I think that like what we saw in the 2022 midterms was a good picture of what we can see in 2020 4. Obviously, this is a presidential, so it's going to be different. And how that shapes out to be remains to be seen. But definitely the major difference here between 2022 2024 is that in 2022, our product was lacking.

Speaker 2

It needed a lot of changes, a lot of updates, a lot of upgrades. We are now there. So what excites me about this year is that we have a real opportunity to capture that growth. And hopefully, I'm very confident that we're going to be able to not only capture it, but be able to keep it and be able to really grow subsequent to that. So I think that's the major difference.

Speaker 2

We have a solid product now. The video product has really come a long way and we're really looking forward to taking advantage of this election year into the future years.

Speaker 5

Great. So one more and then I'll get back in the queue. So RFK Jr. Is running as an independent for President and is on your platform. How has it been done on Rumble?

Speaker 5

And can you provide an update on left wing independent and influencers outside of politics joining and using Rumble?

Speaker 2

Yes. So we recently announced that RFK not only is he an account on Rumble where he's live streaming, he just live streamed his event yesterday where he announced his VP, but he also has become a cloud customer using our cloud. So that's been an important development. With respect to like expanding content into different areas that are not political, we in this quarter, in the Q1 of 2024, we closed a partnership with Barstool Sports, which was a very important one in the sports category. And what I like most about that partnership with Dave Portnoy is that he was more interested in taking equity in Rumble and really believing in the mission than taking more cash.

Speaker 2

So the deal is mostly equity and some cash. And on the equity side, it's not material on the share issuance side of things.

Speaker 5

Great. I'll get back in the queue.

Operator

We now have a follow-up from Jason from Oppenheimer. Please proceed.

Speaker 4

Thanks. A few more. So maybe just on Barstool, I mean obviously there's a lot of content on the platform, but could we actually see the Barstool distribution partnership as a potential driver of engagement? I don't know like in Q2 or just you have a lot of content and while it's quality content, it just it doesn't move the needle. Just can you get some perspective like should we expect a bump on that distribution deal?

Speaker 2

Hi, Jason. So with respect to Barstool, what we did see in January versus over February is they definitely grew on the platform and push more viewers. In terms of like providing like guidance on them specifically, I can't do that. But generally speaking, what we're trying to do here is really kind of build the Rumble sports category in a way that kind of really allows and keeps the sports users onto the platform for longer. And that's kind of been that was kind of the strategy with politics.

Speaker 2

As you grow the political side, there's one creator that someone might watch, they find another creator and it's all kind of within the same area. The same thing we kind of see with sports, you bring in a massive sporting event like PowerSlap or Street League Skateboarding and you kind of want to keep them you kind of want to know you want the user to know that they're all they can also find Barstool and they can find 75 different podcasts that Barstool might do. So I call that drifting into different categories a little bit and different types of content, but that's kind of the reason why we wanted Barstool on the platform to really kind of broaden that sports category. But like as a whole, the amount of content in all the different verticals, I don't see a single creator in the sense moving the needle in any significant way, although we did see street league skateboarding in the Q4 really kind of moved the needle in December. So it could happen, but hard to say.

Speaker 4

Okay. And then just on rack, I mean, obviously, there's always risk in any business, but I mean, just given where you are with the product development and it sounds like the numbers you've seen in March, I mean, is that what's ultimately driving your confidence in the 2nd quarter revenue ramp, just that like RAC is out and you've actually seen kind of numbers now that it's in full execution?

Speaker 2

Yes, that's right. Rack is doing a lot of different things now that we weren't doing in the Q4 of last year. We're really adding a lot of publishers and bringing a lot more inventory. We have websites like the Drudge Report testing RAC. We have Breitbart testing RAC.

Speaker 2

We have countless different publishers now testing RAC. You also have Rumble, which is starting to open up pre roll inventory within the app, and that's bringing inventory in. So we're seeing kind of like the perfect storm of inventory really kind of adding in, and we see a very good path when it comes to being able to add inventory into the system, both through Rumble and Publishers, and we see a lot of open ground there. And just also on the flip side, we see the advertiser growth happening too. As we bring in more advertisers into the system, we're not seeing the drop off on the CPM that one might expect.

Speaker 2

We're seeing very our CPMs are holding as we add inventory, which means that we're going to continue to add inventory. And we've really seen a clear picture here in the last couple of months. And particular March is showing is really strengthening our confidence on Rack right now.

Speaker 4

And last question is Brandon, we noticed there was an acquisition North River in the 10 ks, just a little color there?

Speaker 3

Yes, that's the components of RAC basically. So there's some technology and human capital. It's a company that we acquired and that's the foundation for us building out Rack.

Speaker 4

Okay. Thank you.

Operator

Our next question is a follow-up from Tom with Maxim Group. Please proceed.

Speaker 5

Great. So last three for me. True Social de SPAC was one of your first cloud computing enterprise customers. Does the de SPAC can have any positive implications for Rumble, especially your cloud computing effort?

Speaker 2

Hi, Tom. This is Chris. So yes, I think that the de SPAC is a great development for Truth Social. It puts a lot of capital in their bank and allows them to grow the platform now. So them being our one of our largest tenants on the Rumble Cloud and the first major one to come on to Rumble Cloud.

Speaker 2

That's pretty exciting for us that they can they have the capital now to grow and do what they need to do to take Truth Social to the next level. So as a long term client and also as an advertising partner, where we're monetizing them, they're one of our first publishers as well. This is a very positive development for us that we're very excited about internally. Excellent.

Speaker 5

All right. So then this one, Chris, you're going to have to indulge me. I know you've talked a lot about sports content, but I'm still in disbelief that Mike Tyson is going to fight Jake Paul in the live stream on Netflix. The whole thing there, I think it's just crazy. But that said, you've done real well in the past with sports content.

Speaker 5

Can you provide an update on your sports related content, including its popularity?

Speaker 2

Yes. So, we saw an incredibly successful event from Street League Skateboarding that kind of surprised us all in the Q4 in December. Typically, we didn't see street league skateboarding kind of move the needle for us in any way, but they definitely moved the needle in Q4 December with their latest event. And on the other sporting, we also have Nitro Valley Cross Racing and then we also have PowerSlap that's exclusive. What we're seeing with PowerSlap is that we're seeing a very good trajectory on the PowerSlap front as well.

Speaker 2

The last event that we had was a Super Bowl weekend where we had people from like Travis Scott to Charles Barkley to many, many even iShow Speed and Kai Sanat show up. So we had a lot of influencers come to that event, really push the event to new levels. So we're seeing some nice trajectory also in PowerSlap. So in terms of sports and then obviously attaching Barstool on, the Rumble sports category is doing quite well at this point and has some good trajectory, especially with the most recent events that it's had.

Speaker 5

Great. All right. So last one for me and thanks again for taking all my questions. So wanted an updated thoughts on antitrust regulation, including laws being considered in Canada. I was wondering what impact, if any, there'd be for Rumble if TikTok was banned from U.

Speaker 5

S. App stores. And lastly, would you benefit if Apple had to lower its take rate for its App Store?

Speaker 2

I'll start with the take rate, absolutely. For Rants and tipping within the app, that would be very helpful to have a lower percentage there. With respect to TikTok, we obviously put that letter out publicly. We're very interested in being a technology partner in any consortium that goes forward with TikTok. We want to be part of that conversation.

Speaker 2

I do believe that companies like Google and Meta would have antitrust concerns. So they can't be part of that in my opinion. And the only company out there that has the experience in video and the experience in managing a video platform and even the experience in working on recommendation engines and algorithms for video, the one that it comes to mind is Rumble. So obviously we feel like there's opportunity there with TikTok if something happens in terms of divestiture, we'd love to be part of a consortium on that. And the third thing, if I remember correctly, you're mentioning antitrust in Canada.

Speaker 2

We're Thank you, Chris. Thanks for taking my questions. Our next question comes from the line of Chris

Speaker 5

Thank you, Chris. Thanks for taking my questions.

Speaker 2

Thank you, Tom.

Operator

That is the end of our question and answer

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