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Rumble Inc. (NASDAQ:RUM) Q4 2023 Earnings Call Transcript March 27, 2024

Rumble Inc. beats earnings expectations. Reported EPS is $-0.14, expectations were $-0.22. RUM isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Greetings. Welcome to Rumble Inc. Fourth 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 Instructions] Please note this conference is being recorded. I will now turn the conference over to, Shannon Devine, Investor Relations. Thank you. You may begin.

Shannon Devine: Thank you, operator. I’m here today with Chris Pavlovski, Founder, Chairman and CEO of Rumble; Brandon Alexandroff, the CFO; and Tyler Hughes, the COO. A press release detailing our fourth quarter 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.

There will be updates from Future Company available through press releases and company updates via its social media channels. Now, let’s hear from Rumble’s Founder, Chairman and CEO, Chris Pavlovski.

Chris Pavlovski: Thanks, Shannon. Firstly, I want to discuss 2023, which was a year of building for our Company. Apart from successfully broadening our content library with key signings from various fields such as sports, comedy, and entertainment, we were focused on fulfilling our product commitments. Allow me to review this exceptional year for our top-notch product and engineering teams. Initially, we completely altered the user experience on Rumble by launching a fully redesigned user interface across all primary viewing platforms and integrating our premium subscription service with locals.com to provide creators with better monetization opportunities. Following that, we purchased Callin last May, leading the way for the beta launch of our new patent-pending live streaming tool, Rumble Studio, which will prove crucial for future monetization.

Next, we constructed and launched the Rumble Advertising Center, commonly referred to as RAC. I am thrilled to announce that we have started displaying pre-roll video ads across our mobile apps through RAC in the past 90 days, and are also increasing our inventory by bringing more publishers on board. Besides, we built the needed infrastructure to support Rumble and laid the groundwork for Rumble Cloud, which we publicly launched just a fortnight ago. A completely renovated user interface, significant video platform integration, a new live streaming tool, an advertising network, and a cloud all rolled out within a single year. As a result, we now have an excellent business equipped with four top-tier products. Our team has been working tirelessly to create products and services our audience desire.

I’m not only amazed by these products but also by the team that was behind this huge effort. What we have built can be compared to a mini Google. Put into context the time and investment Google took to build their offerings, it makes our achievements stand out. Google acquired DoubleClick for $3 billion, corresponding to our Rumble Advertising Center. Google paid $1.65 billion for YouTube in 2006, which can be likened to our Rumble Video platform. Google’s billions’ investment in Google Cloud is akin to our Rumble Cloud. It’s worth noting that we managed this feat with fewer than 250 staff members. It’s vital to understand why our business was perfectly poised to launch our cloud offering while talking about our expansion into the cloud business.

From the outset, we have been independent of third-party cloud platforms. Our primary video platform rumble.com has been developed and scaled on Bare-Metal since 2013. It was a wake-up call when Parler was shut down, which was particularly shocking since major tech platforms had more violations, but only Parler faced severe repercussions. Amazon AWS was the gatekeeper — they switched off the lights, leaving Parler no avenue for recovery or redemption. We recognised that creating Rumble’s infrastructure was vital for our business survival, which led us to undertake it in 2021. This endeavour let us develop a full-stack, safeguarding our business and also granting us the advantage of the positive long-term economic outcomes of running our own framework and avoiding lock-in to the prejudiced pricing of existing hyperscalers.

This infrastructure is the spine that powers rumble.com and is the technological base for Rumble Cloud. Constructing our own infrastructure not only shielded Rumble but also provided a fantastic opportunity to utilise the magnitude of rumble.com to develop a cloud service at scale, tackling a market riddled with problems like vendor lock-in tactics, unfair pricing structures, data and privacy trust issues, complicated structures and censorship. By launching Rumble Cloud to the public early this month, there is now a fresh new cloud provider option available in the market, with the prime goals of safeguarding an open Internet, commitment to keeping the lights on come what may, operating on the latest-gen hardware delivering top-class network speeds and quality, and finally, shaking up the market with our unique pricing model.

Our framework intends to deliver the most transparent pricing structures, allowing businesses to regain control over their IT expenditures. As Rumble has pulled market shares from YouTube, we envisage Rumble Cloud following suit in the cloud market, targeting the excessive profits and revenues currently monopolised by Big Tech at the infrastructure layer. We’re operating on the sole highway of a free and open Internet – a highway that cannot be cancelled. We stand unshaken when Big Tech falls. This position secures Rumble and, by natural extension, our ecosystem of users, creators, advertisers, subscribers, publishers, cloud partners and shareholders extensively while safeguarding businesses’ data independence. We’re offering opportunities to all companies.

In support of our go-to-market strategy for mid-market and enterprise sectors, we recently announced collaborations with Qinshift, a market leader in managed IT services and solutions with a workforce of 7,000, facilitating Rumble’s significant scale-up and acceleration of our go-to-market approach, and ACP CreativIT, enhancing our North American operation while broadening our scope with a variety of complementary services and solutions via the cloud infrastructure. Further to launching the high-performance compute tiers with dedicated vCPUs, we plan to grow our offerings to include lower-cost tiers with shared vCPUs, catering better to developers and small businesses. As with all our products, we will evolve based on market demands. Presently, we believe that the mid to large enterprise customers present significant opportunities.

While decisions on purchases for these businesses may require some consideration, we’re invigorated by the recent partnerships formed with Qinshift and ACP CreativIT, as well as the initial interest shown among mid-market and enterprise prospects. Presently, the Company is shifting its focus from creating the product to generating revenue. As our products are now fully in production, we forecast revenue growth from the second quarter onward, with the majority of this growth occurring in the latter half of 2024 once our monetizing products start to gain momentum. Particularly, our confidence in this forecast is strengthened by the excellent results seen in RAC throughout March. The Rumble Way commences with the correct assets and products.

In the last couple of years, our core audience has remained consistent, boasting over 40 million MAUs. This audience allows us to meet our future revenue targets. Importantly, it should be noted that our impressive Q4 results, due to high-profile sports events such as Street League Skateboarding which increased our MAUs to 67 million for the quarter. However, due to the temporary nature of these events, this upward trend did not continue into Q1 of the current year. Currently, our product range and core offerings are poised and ready to scale, aiming to generate additional revenue. Coupled with the right products to monetize, our audience was acquired with less than 250 team members and closed the year with over $200 million cash in hand.

We are challenging Big Tech on all fronts, backed by the most dedicated team and an advantageous market position which will promote revenue growth. I am more motivated and excited than ever before. The team shares this motivation and I look forward to sharing our continued progress. Now, our CFO, Brandon Alexandroff, will continue the call.

Brandon Alexandroff: Thank you, Chris. Let me give you a conclusive overview of our Q4 and full-year financial outcomes before passing the call to the operator for Q&A. For the entirety of 2023, we declared revenues of $81 million, marking a 106% increase compared to $39.4 million in the previous year. In Q4, we recorded $20.4 million in revenue, in comparison to $20 million from Q4 of 2022. The revenue generated in Q4 of 2023 included an additional $3.5 million from other services which was offset by a decline in advertisement revenue of $3.1 million. The rise in revenue from other services mainly came from subscriptions, content licensing, tipping features and one-off content. The costs of services for the quarter were recorded at $39.5 million, a significant increase from the $23.5 million from Q4 of 2022. This increase was primarily driven by a 14-million-dollar increase in programming and content cost and a 2-million-dollar increase in hosting expenses and other service costs.

For the full-year, cost of services increased by $102.4 million to $146.2 million due to an increase in programming and content costs of $98.9 million, hosting expenses of $2.7 million and other service costs of $0.8 million. Moving to our cash position, we ended the year with $219.5 million in cash, cash equivalents and marketable securities, compared to $267 million 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 first quarter, 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. First quarter revenues still largely reflect this volatility and as a result will be down slightly from the fourth quarter.

However, with the benefits of improved automation, we expect to see a sequential quarterly increase in revenues beginning in the second quarter. 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 third quarter earnings call. With our revenue engines coming online and our guaranteed creator commitments set to significantly decrease during 2024 and 2025, we continue to move materially towards breakeven in 2025. That concludes my prepared remarks. Before I turn the call over to the operator, I invite you all to join Chris this evening at 7:00 PM Eastern Time for an exclusive post earnings 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.

To continue reading the Q&A session, please click here.