Ladies and gentlemen, welcome to the Rumble, Inc. Third Quarter 2023 Earnings Conference Call. This conference is being recorded.

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 third quarter 2023 results was released today and is 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. Future company updates will be available via press releases and via the company's identified social media channels. I will now turn the call over to Rumble's Founder, Chairman and CEO, Chris Pavlovski. Chris?

Hello, and thank you for joining us today. The third quarter was strong for our business as we continue to deliver on our commitments to build our video and cloud platforms and get ready to scale monetization in 2024. First, I would like to highlight the cloud business, where we achieved our biggest milestone to date with the launch of the beta release of Rumble Cloud in September, ahead of schedule. As we have stated in the past, building our own infrastructure for Rumble's video platform is existential for our business. We can never rely on big tech cloud providers for hosting. Today, with the full build-out of the infrastructure to support Rumble Video, we are in a position to sell our excess capacity to the market through Rumble Cloud. The aim of Rumble Cloud is to provide cloud solutions to a growing segment of businesses that are disgruntled with big tech cloud providers due to unfair pricing strategies and increasingly restricted terms and conditions. Since we launched in September, with minimal promotion, the response has been extremely encouraging, with qualified leads spread out over many markets, led by entertainment, e-commerce, gaming, education, and telecommunications. We have already begun onboarding clients onto the platform, where we will refine our product and continue to ramp onboarding over the coming months. Our goal is to collect as much feedback in the beta stage as possible and launch fully in the first half of 2024. Second, I'd like to touch on the progress we've made to our video platform, where our vision is to build the most attractive economic toolkit for creators on the Internet. I'm very excited to share the integration of our recent acquisition of Rumble Studio, previously Callin, which closed in May and is now in beta. I believe this could be a game changer for Rumble and the creator community as a whole. It has the potential to not only transform the live streaming experience for our creators, but also become a critical component of driving creator sponsorship revenue at scale. From a live streaming perspective, Rumble Studio will be the new cockpit for creators, where they will be able to seamlessly manage and customize their live stream production directly from the Rumble Studio application, control their distribution, and ultimately provide a world-class interactive experience for their audience. From the monetization perspective, Rumble Advertising Center will be directly integrated into Rumble Studio. Imagine having RAC present creator sponsorship offers in real-time during streams and prior to going live on Rumble Studio, where creators can elect to do the sponsorship within their stream. This is what makes our teams really excited and why I believe it could be a real game changer. These sponsorship offers will not only extend to the Rumble audience when going live but since Rumble Studio will allow streaming to all platforms, our sponsorship marketplace can now extend into all live streaming platforms and all audiences, creating massive potential for this product. On our last earnings call, we mentioned that our creator sponsorships are currently facilitated by a manual sales process. Rumble Studio, integrated with RAC, will be the key for us to facilitate scaling this part of the business, enabling us to move from a small cohort of creators to potentially thousands of monetized creators overnight. We expect Rumble Studio to very quickly add value to our business, both by greatly reducing the friction to live stream on Rumble, which will bring more creators to the platform and also by accelerating scaling for sponsorship revenue in the future. Looking back at our first year as a public company, the capital raised in our public listing has enabled us to build out our content library and attract leading content creators, helping us successfully grow our diversified audience to 58 million monthly active users. Our content acquisition and diversification strategy has come at a calculated cost, but we believe our money has been well spent to date. In particular, our strategy should position us well to achieve our next goal relating to monetization initiatives and that is attracting advertising agencies to our platform. Our momentum with advertising agencies, including top-tier brand and political agencies, stems largely from our relationships with sports leagues and the acquired talent in this field. The investments we have made to date position us to leverage these relationships with very clear runway ahead. Today, Rumble reaches a great variety of audiences. According to ComScore, the industry standard for third-party digital audience tracking, political independents and those with no party affiliation are our largest segment, with Democrats second and Republicans third. Let me repeat that: independents and those with no party affiliation are our largest political audience segment. It's clear Rumble has entered a stage of diversification that caters to a diverse audience, allowing advertisers to reach desired audience segments on our platform. Importantly, the attraction of advertising agencies allows us to slow down our spending without affecting our revenue potential. If there is one takeaway from our third quarter, it is that Rumble is nearing the end of the building phase and is on schedule to scale monetization in 2024. We raised the necessary funds just over a year ago, have been diligent and strategic in our spending, and now have the creators and audience necessary to attract the attention of advertisers. To date, we have provided a small number of our creators with guaranteed minimum earnings because our advertising ecosystem did not match that of competing platforms. As our monetization engines, RAC and Rumble Studio, come online, creators will begin to see their earning opportunities significantly increase. This development enables us to pull back on our spending to acquire content while maintaining our creator and audience base. To crystallize this a bit further, by the end of 2024, we anticipate that increased ad-driven monetization will allow us to attract new and retain existing creators, with reduced reliance on guaranteed payments. With the aforementioned in place, we expect our guaranteed creator commitments to significantly decrease by the end of 2024, while our revenue engines come online, moving us materially towards break-even in 2025. The third quarter also proves that we have created a community for everyone. We have proven that Rumble is the preeminent neutral platform, and the opportunity that we provide has never been more attractive.

Thanks, Chris. I'll now take you through our Q3 financials at a very high level before turning the call over to the operator for Q&A. We reported revenues of $18 million for the quarter. This compares to $11 million for Q3 2022. The growth was primarily driven by a $2.3 million increase in advertising revenue and a $4.7 million increase in licensing and other revenue. The increase in advertising revenue was driven by an increase in consumption, as well as the introduction of new advertising solutions for creators, publishers, and advertisers, including host-read advertising in RAC, both of which we started to build and test in the second half of 2022. While our revenue remains relatively small and subject to variability quarter-over-quarter, the progress made in attracting and retaining our audience, as well as the development of creator monetization tools, are proving out our overall business model and potential of the company. Our 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. Cost of services also includes third-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 $39.8 million, compared to $12.3 million in Q3 a year ago. The increase was due to an increase in programming and content costs of $26.1 million, hosting expenses of $700,000, and other service costs of $700,000. Moving to our cash position, we ended the quarter with approximately $267 million in cash, cash equivalents, and marketable securities, compared to $338.3 million as of December 31, 2022. To date, as intended, a large portion of our cash used has been to acquire content by providing economic incentives, including minimum guaranteed earnings, to a limited number of content creators, including sports leagues, which we have not yet begun to monetize meaningfully. This content acquisition strategy has allowed us to enter key content verticals and secure top content creators in those verticals before we have full monetization capabilities in place. And as Chris mentioned, we anticipate increased ad-driven monetization will allow us to attract new and retain existing creators with reduced reliance on guaranteed payments. As a result, we expect our guaranteed creator commitments to significantly decrease by the end of 2024, while our revenue engines come online moving us materially towards break-even 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 p.m. Eastern Time in an exclusive post-earnings interview with Matt Kohrs to be streamed live on the Matt Kohrs Rumble channel.

Our first question comes from Tom Forte with D.A. Davidson.

I had several questions. I wanted to ask 2 and then get back in the queue and then ask the remainder. So, first off, can you provide your current thoughts on your ability to track influencers from other platforms including Twitch? It looks like news came out today that Amazon had more layoffs in their gaming space, only this time it was not Twitch specifically? That was my first question.

Yes. So we've had a lot of success with attracting creators from Twitch as of, I would say, earlier Q2 of this year. And we believe that momentum should be able to continue going into next year as these other platforms have exorbitant fees with creators. So for example, I believe the rev shares on Twitch are very high in favor of Twitch, whereas a platform like Rumble is offering much more compelling rev shares which should help attract that creator base over to our platform.

Great. And then for my second question, I'll get back in the queue. It looks like you've been the exclusive live streamer for numerous Republican presidential debates with more coming up. Have these been needle movers as far as engagement goes?

Absolutely. When it comes to the RNC, the Republican primary debates, the first debate in particular that I can remember had over 700,000 concurrent streamers on the platform at a single point in time, making the GOP the largest stream in the United States at the time that it happened. So we've seen some huge success with the debates, pushing our platform to very high metrics.

Great. I'll get back in the queue for more questions.

Our next question comes from the line of Jason Helfstein with Oppenheimer & Company.

I'll ask a few. But first I want to say, I watched the recent GOP debate on my phone, on cellular, on your app, and it was well done. So kudos to that. So I guess, we have a lot of stuff to unpack, so I'll ask a few, and then we'll keep taking turns. So U.S. MAU was up nicely quarter-to-quarter, but minutes per user were down. I don't know if there's any general thoughts behind that, as far as the mix of content in the quarter. So that's question one. So I'll just go one at a time.

Yes, so when it comes to the engagement metric, there are a couple of things to consider. First off, in the summer, we had the GOP debate in the middle of the season. Many creators took time off during the summer, so you're seeing lower engagement numbers. Long streams from various creators that typically contribute to higher watch time simply weren't happening during that time. We have also slowly been migrating our CDN onto our infrastructure, and preliminary results suggest that our CDN is recording less bandwidth than the third-party CDNs we previously utilized.

Got it. So maybe MAU will be a better indicator than minutes, at least from a training standpoint. And then on ad monetization, is RAC behind schedule? Given that the MAU is up sequentially, it was a little surprising to see the U.S. revenue, or just the advertising revenue, kind of down sequentially. So maybe just unpack that. I mean, sales and marketing was down, so was there less manual selling effort ahead of RAC? Just kind of why was revenue down sequentially? Because usually, the third quarter is seasonally not a smaller quarter than the second quarter. And I'll do one more.

Yes, absolutely. So when it comes to revenue, what we stated in the second quarter is that much of our revenue stems from the testing that we've done with a small cohort of creators on the sponsorship side. And we haven't, at this point, fully scaled RAC on the programmatic side. So there are two sides to our advertising business: sponsorships through RAC and programmatic advertising. Currently, we are on schedule to launch programmatic within our app this quarter, hopefully in the next few weeks. That will be a significant moment for us when pre-rolls are introduced within the app, and it should positively impact revenue going into 2024. As for the sponsorship side, we are only testing a small cohort of creators, and we need to integrate that into Rumble Studio and RAC, delivering that in early 2024 so that people can get those sponsorships on scale while they stream live.

So just to follow up and not to put words in your mouth, was the sequential decline in advertising revenue more a function of having advertisers who tested the platform in the second quarter but did not return in the third quarter? Or were you shifting resources ahead of the RAC and Rumble Studio launch?

Yes, I don't think it was just an advertiser issue. I believe it relates to a small cohort of creators who were monetized effectively but took time off during the summer, which impacted numbers. It is a combination of several factors and those are two key contributors.

Yes. And then last one and then I'll jump back in the queue. So gross margin loss was much worse than expected, as it has been getting worse. This is the third quarter of incrementally worse gross margin loss. I mean, obviously there's the revenue impact, but was there also kind of a mix on content, just the way licensing, I believe, has a low mix between revenue licensing versus advertising or other content maybe. Just help us unpack why the gross margin loss from a ratio standpoint was so much worse than the second quarter.

Yes. Hey, Jason, it's Brandon. So the cost of services was roughly flat compared to the prior quarter. The predominant chunk of cost of services is the creator incentive costs, which are the commitments that we've made and the minimum guarantees we discussed, which will significantly decrease as we approach the end of 2024. These commitments will remain in place for the next few quarters.

Our next question is from Tom Forte with D.A. Davidson.

So 3 follow-ups for me and then I'll stop. So one at a time. Can you discuss what artificial intelligence means to Rumble and to what extent you're able to use the technology to enhance content moderation on the platform?

Yes. Tom, when it comes to AI and moderation, we've opted to stay away from that entirely. I think those are the mistakes that the larger platforms have made: relying on technology to flag and remove content. We want to be more particular and have real human eyes on content rather than an unproven system. So regarding AI and moderation, we haven't implemented anything of that sort, and we currently have no plans to implement anything of that kind.

And then second, this is very philosophical, but I like to get philosophical with you, Chris. On AI, it seems to me there's a real risk that given the parties involved, advancements in AI might increase the undue influence on consumers from big tech: Amazon, Apple, Google, Meta platforms, Microsoft. I'd appreciate your thoughts on that as a long-term participant. Additionally, what can you do, if anything, to disrupt that?

Yes. Current advancements in AI and artificial intelligence rely heavily on video content. It's not something that we are engaged in. A primary focus for Rumble from a machine learning standpoint will be ensuring the delivery of content aligning with viewers' interests after a video concludes. We will not be adopting a new AI-driven feed for a long time, due to multiple considerations. However, regarding content discovery and enhancing watch time, there are definitely ways we could approach recommendations, but we must do it cautiously and effectively based on audience desires.

Excellent. Last question. Can you give your current thoughts on the regulatory efforts across the globe concerning the Internet broadly and free speech more specifically, including those in Canada?

Yes. From our perspective, the First Amendment is of utmost importance in the United States and provides a strong safeguard for our operations. Regarding jurisdictions like France or China or North Korea, it's murky and not areas we are involved in. As for Canada, we are hopeful for favorable changes, but it remains uncertain how laws there will unfold. It is still a waiting period for us regarding the enforcement and plans in Canada and similar markets. However, our primary focus remains on the U.S., where we've successfully challenged instances of governmental constraints, specifically in New York, and we plan to continue advocating for First Amendment protections.

Our next question is from the line of Jason Helfstein with Oppenheimer & Company.

Can you discuss what factors influenced the Rumble Cloud impact on gross profit or EBITDA over the next year? Specifically, are we just selling excess capacity, or will there be additional costs involved? Will it still be beneficial from a financial perspective? I'll also have one more question after this.

Yes. We're not providing any guidance on cloud at this point.

Okay. And then your comment about EBITDA breakeven in '25, is that for the full year of '25 or just like at a point in '25? Like a quarter in '25?

Just to clarify. So we haven't defined what we mean by breakeven at this time. There are disclosure requirements surrounding non-GAAP metrics. We'll develop the appropriate set of metrics and communicate those during 2024. But right now, we haven't defined that, nor are we providing guidance on specifics.

So what was that comment, though? You specifically said our goal is to be breakeven in '25.

We expect to be breakeven. We'll communicate more about what that means in 2024.

As there are no further questions at this time, the conference of Rumble, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.