RUM - NASDAQ

Good afternoon ladies and gentlemen and welcome to the Rumble Inc. Third Quarter 2024 Earnings Call. All participants are in listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] Please note that this event is being recorded. I would now like to conference over to Shannon Devine, Investor Relations for Rumble. Thank you.

Thank you, operator. I'm here today with Chris Pavlovski, Founder, Chairman, and CEO of Rumble; and Brandon Alexandroff, CFO. A press release detailing our third quarter 2024 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 this 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 release 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 Pavlovski.

Thank you, Shannon. Wow, what a couple of weeks. It's been two years since we first became public and since we hosted our first earnings call. I can honestly say that I've never been more optimistic about our opportunity. And more importantly, it has never felt more real than it does today. With the U.S. presidential election now in the rearview mirror and on the heels of our two-year public anniversary, I feel this presents the perfect time to reflect on where we were. What has transpired over the two years since our public debut and explain where we go from here. On our first earnings call, I shared with you our mission, to protect a free and open Internet. The DNA of our community, our users, our creators, our partners, and our employees are reflected on how Rumble held the line on free speech when no one else had the courage. It was lonely at times, it was even scary at times. We were canceled by technology partners, commercial partners, cut off by the so-called mainstream and forced to shut off countries. We faced hit piece after hit piece. We even faced illegal advertising boycotts. Most importantly, I shared the pain of our creators who have had their voices suppressed and even eliminated from society. It was out of control. Can you imagine that our current President-elect was canceled? But Rumble held the line, we allowed these voices to be heard. We could see the movement when no one else did. We saw the momentum as our creators grew their audience from thousands to tens of thousands to even hundreds of thousands of users every day. We set out on a growth strategy to build our teams, our infrastructure, our products, and our revenue engines for our creators. 2023 was a building year and 2024 has been focused on bringing the revenue engines online and monetizing this incredible audience we have, and we have delivered. We perfectly position our business for this moment. Turning to the election, we cemented ourselves as the leader in the independent creator space. On the evening of November 5th and into the morning of November 6th, we set new high marks in a variety of categories including a number of live streams, live concurrent views, consumption, total Rumble premium subscribers, and revenue generated through the Rumble Advertising Center known as RAC. Meanwhile, traditional TV networks saw ratings plummet by as much as 50% versus the 2020 election. This was the nail in the coffin for traditional media and the dawn of a new era where the independent creator is the new source of truth and Rumble is at the forefront. According to Stream's charts, which tracks live stream metrics, Rumble set a new peak number of concurrent viewers and took a 17.8% share of live hours watched in the United States on election day. To put this in perspective, our 17.8% compares to 71.2% for YouTube and 10% for Twitch. Additionally, the Rumble app also reached number three in the Photo and Video category of the Apple App store ahead of YouTube, not bad considering that YouTube is estimated to be worth over $400 billion. Dan Bongino set a new high for individual stream with over 515,000 concurrent viewers and host Steven Crowder notched a personal best of over 460,000 concurrent viewers. These were the two biggest independent creator live streams in the world at the time. And keep in mind, this was all running on Rumble Cloud, an amazing technical feat by our incredible team of engineers and proof that our cloud belongs in the big leagues. Our cloud offering has taken hold and we are continuing to have conversations with large enterprise customers in all various stages of the sales cycle. The progress here is encouraging and the election's proof of just how mission-critical our product is. Turning to Q3. We saw strong growth across our core business, reaching monthly active users of 67 million and I can confidently say we are advancing our business from a more volatile testing phase to a more scalable and predictable phase. I mentioned that 2023 was focused on expanding our goal to secure and sustain our audience, while we certainly have the audience, monetization has taken the majority of our focus for 2024, and we have been progressing nicely with quarterly revenues increasing sequentially since Q2. Importantly, the headwinds we have experienced on the monetization front are being overtaken by election-related tailwinds. With the goals of expanding our content offering and cultivating a loyal audience, avenues for monetization opportunities opened wider and sooner than I could have anticipated. One example of this is Rumble Premium, which exceeded our expectations. We launched this service as a no ad experience back in May this year, similar to the YouTube premium model. As we increased our ad load by introducing mid-rolls in September, we saw strong growth in premium subscribers, and we're very pleased with the progress. However, we are now stepping on the gas by adding exclusive content to the Rumble Premium offer. On election night, we announced that Stephen Crowder MugClub, one of the largest subscription communities on the Internet is now included in the Rumble Premium offering with Crowder's exclusive content. This proved to be a very strong driver of subscription growth in recent weeks, and we are looking to continually add content and creators to the offer, such as Street League Skateboarding, which we'll be adding to Rumble Premium shortly. One easy way to think of this is that we are now offering a combination of YouTube's no ad experience and Netflix's subscription to exclusive content. With this hybrid model, we feel that we have an opportunity to provide superior economics to the creator versus any other platform. The fourth quarter has been something special to watch. It's the first full quarter that our entire revenue mousetrap is live across RAC and Premium, and the early results have been very promising. I feel that Rumble is now in the lead with the best monetization engine in the creator economy. For all of these reasons, I continue to be excited about our performance in the fourth quarter, which marked another quarter of consecutive revenue growth. As we look forward, the elephant in the room is how much longer can brand advertisers ignore more than half the country. We and our user base are now a majority. Although many platforms have peeled back their policies on strict moderation, the audiences have not gone back to them. They have stayed loyal to Rumble and during this time, we've grown our user base. Brands cannot ignore this forever. And in fact, we have such [ph] a proof that it's finally changing. Immediately after we saw GARM disband, Rumble landed its first major brand advertising partnership, which is set for December of 2024. For those who may not be familiar, I previously spoke about GARM, the Global Alliance for Responsible Media conspiracy, effectively creating an advertising cartel more powerful than most of the media buying agencies in the world. The so-called standards manufactured by GARM were, in fact, an agreement among competing advertisers and ad agencies not to advertise with platforms like Rumble and X, which created an artificial headwind for our business. Within days of our lawsuit alongside X, GARM was dismantled. Not only has Corporate America started to turn prior to the election, but I believe the results of the election will only accelerate this onset of brand partnerships across both advertising and cloud. I have already seen early signs and we are a week out from the election. I always said 2024 is our Super Bowl, and now I can say we won the Super Bowl. Rumble set new records in new heights and corporate media viewership dropped as much as 50% over 2020. The world is forever changed and Corporate America is going to change with it. They don't have a choice. Our courageous employees helped change the course of history, and I cannot be more proud. The American people have spoken, cancel culture is dead, free speech is now mainstream, and rolls in the driver's seat with the best lineup of independent creators with the best economics. Now, I'll pass to Brandon Alexandroff to walk through the financials.

Thank you, Chris. I'll now take you through our third quarter financials at a very high level before turning the call over to the operator for Q&A. For the third quarter of 2024, we reported revenues of $25.1 million compared to $18 million for Q3 2023, an increase of $7.1 million, of which $5.9 million is attributable to an increase in audience monetization revenues and $1.2 million is attributable to higher other initiative revenues. For the third quarter, we reported ARPU of $0.33 compared to $0.37 in the second quarter. Given that we are currently in the early stages of monetizing our user base, we expect to see some lag in revenue relative to users, particularly during periods of high user growth. As a result, in the third quarter, Rumble saw a decrease in ARPU as revenue growth slightly lagged our strong MAU growth from lead-up to the United States presidential election. As we have previously stated, our expectation for revenues in 2024 was a sequential quarter-over-quarter increase beginning in the second quarter of the year. So far, we have achieved and we continue to expect revenue growth for the remainder of 2024. Cost of services decreased to $36.4 million for the quarter compared to $39.8 million in the third quarter of 2023. The $3.3 million decrease is due to a decrease in -- and content costs of $5.4 million, offsetting an increase of $1.7 million in share-based compensation and $0.4 million in other cost of services. As of September 30th, 2024, our programming and content agreements had a minimum contractual cash commitment of $38 million, down from $106 million at December 31st, 2023. Moving to our cash position, we ended the third quarter of 2024 with approximately $132 million in cash, cash equivalents, and marketable securities compared to $219.5 million as of December 31st, 2023. I would like to draw your attention to a specific item in our press release, the trend in cash, cash equivalents, and marketable securities usage, which has improved in each of the last four quarters. For the third quarter, our cash usage was $22.3 million, 25% lower usage compared to the second quarter. We continue to maintain sufficient cash to meet our ongoing capital needs. Before I conclude, I would like to reiterate our expectation to continue to move materially towards adjusted EBITDA breakeven in 2025. To that end, we started reporting adjusted EBITDA this quarter. Adjusted EBITDA loss for the third quarter 2024 was $23.5 million compared to a loss of $35.4 million in the third quarter of 2023. That concludes my prepared remarks. Before I turn the call over to the operator, I invite you all to join Chris this evening at 6:30 P.M. Eastern Time for an exclusive post-earning interview with Matt Kohrs to be streamed live on the Matt Kohrs' Rumble channel. I will now turn the call over to the operator to open up the line for questions.

Thank you, sir. We will now be conducting the question-and-answer session. [Operator Instructions] Our first question comes from Scott Devitt of Wedbush Securities. Please go ahead.

Hey thanks. Now that traditional media have been exposed with the election and this is kind of your time, as you've described it in the call, I don't know what type of visibility that you, your team in terms of like forward advertising revenue. But as we try to get a better understanding of kind of the trajectory of the business beyond usage metrics and things like that and the ability to attach revenue as you kind of go into this new period. Is there a way to quantify that more in giving formal guidance or just something to allow us to better understand like what's happening financially in the business versus waiting until end of quarter when you report numbers? And cognizant of kind of the commentary that you gave around it, but I was just wondering if there's ways -- if you're gaining visibility in ways that you can quantify it, it would be interesting to understand that earlier?

Yes, thanks for the question. This is Chris. With respect to the advertising business, up until now, it's been very dependent on direct response and performance-based advertising which I would say is a pretty good line in the sand in terms of where we are. I don't foresee direct response faltering in any major way being as volatile as it was in the past, and I see a tremendous upside now going forward in terms of how brands can start coming in. The major question is with the advertisers is how fast do they start moving and when do they start moving in on the brand side? Like I said, we did one brand partnership pretty immediately after GARM disbanded. And the major question still holds is like how many others are going to follow once this happens going into 2025. But I definitely see this as a tailwind, and we kind of have a line in the sand with respect to the direct response type ads that we already -- I don't see those going away and pushing us lower at any point. So, I do see that what I'm seeing in Q4, obviously, with our first brand partnership coming in December and what we're currently seeing even with direct response, is going very, very well at this point. I hope that answers your question.

Yes, it does. And send along my congratulations to you for pressing through this period when the business has been suppressed, I know it has. So, congrats to you and the team.

Thank you. Really appreciate that.

The next question comes from Jason Helfstein of Oppenheimer & Co. Please go ahead. Unfortunately we're not getting any response from Jason's line. Going on to the next question, which comes from Thomas Forte of Maxim Group. Please go ahead.

Great. So, first off, Chris, congratulations on how everything worked out. I've been very impressed with your mission and it's encouraging to see things moving in your direction and in your favor. So, I think you talked about some of your content plans earlier in the call, but I wanted to know -- I want to follow-up on a question I think I asked last quarter, which is what are your plans in general to retain your high level of engagement now that we're on the other side of the election? So, that's my first question.

Thanks Tom. This is Chris. So, with respect to the engagement levels, what we're seeing now, I think, is much different than what we saw in 2022 during the midterm elections. Our product is far superior than it was back then and we've really kind of built the product in a way to try to stick this audience better than we ever have. We are seeing, obviously, up until the elections and even until now, we're seeing a lot of these big channels retain a lot of the engagement and retain a lot of their users in ways that we haven't seen in the past. It's still early. I'd like to see this kind of play out in Q4 and Q1 to really kind of get a sense of where everything kind of sticks and how it sticks. But generally speaking, from our point of view, the product is really going to engage a lot more stickiness especially as we ramp up the premium offering, we're seeing really high engagement from the premium cohort and real stickiness with that premium cohort. And as we add more content to that, I expect that to only increase that engagement on the platform. So, up until now, I would say it's still too early to say, but early signs and all the product improvements, I'm very hopeful and optimistic that we're going to stick an audience in a much bigger way than we ever have in the past. And I think we've currently seen that throughout the course of the year as well as we move quarter-after-quarter here in 2024.

And then for my second question, maybe I'll ask three total -- is you've talked historically about, I guess, the tools to be the Rumble Ad Center for getting your user interface where you want it to be on all the different platforms. So, you've talked about how a large impediment to advertising revenue has been removed, but I want to talk about your current feeling on, do you have the tools where you want them? Do you have your user interface where you want it? So, that's my second question.

Yes, I believe we do. At this point in time, I feel like the Rumble Advertising Center is in the best place it's ever been. We introduced mid-rolls in the middle of September of -- which is only a couple of months ago. And what we noticed is that -- and kind of surprised us a little bit is that once we added the mid-rolls, it really kind of made everything click for us in terms of Rumble Premium. We saw traction on premium kind of move quite nicely once we introduced mid-rolls and obviously, we saw uptick in revenue because we started introducing mid-rolls. So, not only did we see the boost on RAC, but we started to see a boost on Premium, which really kind of created this flywheel in terms of the creator economics in a way that we didn't quite foresee until we introduce those mid-rolls. So, the mid-rolls had a much bigger impact than we initially thought it would on both sides of the business for Premium and RAC racks. So, we think at this point right now, the mousetrap that we do have for the creator is in the best shape we've ever had it. Obviously, there's room for improvement in optimizations, but we are really, really excited with how things are turning out, how we've brought in Steve and Crowder into the Rumble Premium experience. And this is something I really, really want to lean into going forward because the numbers are proving to be very fruitful for us.

Great. And then my last question, and thanks for taking my questions. So, earlier this year, I had a great win on the cloud front with the Miami Dolphins. Can you just talk about the sales cycle for cloud? And if you think it's here, I guess, staying the same or getting any shorter? So, how should we think about the sales cycle in the cloud monetization going forward?

Yes, absolutely. So, we did do the Miami Dolphins deal. And more recently, we started selling some NVIDIA H-100s to sticker meal on the AI front. And we see the opportunity for Rumble Cloud that's ahead of us right now and I think being that we're post-election as well, I think there's like a real opportunity here with some large enterprise and potentially government clients that we're in talks with that I've mentioned in the past, and it's something that we're very excited about because any of these large clients or governments would move the needle pretty dramatically on the cloud front. So, these sales cycles do take long, but they are all moving forward, and we're cautiously optimistic here that we'll be able to start to see some traction on that front on the cloud front -- some material traction.

Thanks Chris. Thanks for taking my questions.

Thanks Tom.

[Operator Instructions] We've been rejoined by Jason Helfstein of Oppenheimer & Co. Please go ahead.

Hi everybody. Not sure if this was answered already, but just as you're thinking about fourth quarter, given that you don't formally guide, can we expect similar or better revenue seasonality when you think about the seasonality last year and kind of how you expect this year to play out? Just any kind of help with that directionally? Thank you.

Yes. So, we -- and I think as we said earlier in the year, we expected quarter-after-quarter revenue growth in 2024 and we've achieved that so far, and we do expect that to continue into the balance of the year as well.

Jason, one thing I want to add, this is Chris, is that we're really, really positive on RAC rack right now. In fact, we introduced mid-rolls back in the middle of September, which we don't really get to see in Q3, but in Q4, that will be a full quarter with RAC kind of really humming on the advertising side. And as Brandon reiterated, we do expect sequential quarterly growth go into Q4.

Jason, does that complete your question?