Ladies and gentlemen, greetings, and welcome to the Rumble, Inc. Third Quarter 2023 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Shannon Devine, Investor Relations. Please go ahead.

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 the growing segment of businesses, who are disenfranchised 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 is now in beta. I believe this could be…

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 include 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 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 p.m. Eastern Time in 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 from our covering analysts.

[Operator Instructions] 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 -- across the platform at a single point in time with the GOP being the largest stream, we had over 700,000 concurrent streamers, watchers on the platform according to stream charts. And I believe the GOP was the number one stream in the United States at the time that it happened. So we've seen some huge success on the debates, and pushing our platform as well to really high -- to very high marks.

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 kind of per user were down. I don't know, if there's any general thoughts behind that, as far as 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's a couple things there. First off is that we have, in the summer, for example, we had the GOP debate in the middle of the summer. A lot of creators not only in the summer are taking time off, so you're seeing a lot of, for example, Steven Crowder is not doing his stream all in July. And these long streams obviously add to a lot of the watch time. Not him particularly, but a lot of different creators that don't create content over the summer. We also have moved our -- we're slowly moving over our CDN onto our own CDN, and from preliminary results that we're seeing is that our CDN is recording - it seems to be recording less bandwidth than the third-party CDNs that we used.

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

Yes, absolutely. So when it comes to revenue, look, what we said in the second quarter is that a lot of our revenue stems from the testing that we've done with the cohort -- small cohort of creators on the sponsorship side. And we haven't, at this point, fully scaled RAC on the programmatic side. So there's 2 sides to the business that Rumble when it comes to the advertising. One is the sponsorship RAC, RAC sponsorships and the other one is going to be a RAC programmatic -- and right now, we're on schedule to be launching programmatic within our app this quarter, hopefully, in a few weeks to like 2 to 4 weeks' time. And that will be a big moment for us when we start introducing pre-rolls within app and it should have an effect on revenue going into 2024. And then the second component is, because we're only testing a small cohort of creators on the sponsorship side, we need to integrate that into Rumble Studio and RAC and deliver that early in 2024, so that people can get those sponsorships on scale, while they're going live on streaming. So I wouldn't say RAC is behind. In fact, I think we're making history in the sense that we're building these tools in the last year that companies like Google took -- they bought DoubleClick for billions of dollars and build out their tools over like a decade. We're trying to compress that all in the last 365 days. So I think we're doing extremely well on that, having RAC where it is right now and being ready to introduce pre-rolls for 2024 is in our apps and OTT is a big milestone for us, and we're on target to be doing that. And then as we introduce RAC into Rumble Studio, which just came out into beta in the last couple of weeks, we still have to build the sponsorship part into the studio. I think we're doing quite well on building that out.

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

Yes, I don't think it was a, it's an advertiser thing. I think it's more of a cohort of creators. If we have a small cohort of creators that we're monetizing very well and they're taking vacation during the summer, that's going to have an impact in addition to the fact that we are really trying to get RAC and the sponsorships and RAC and the Studio and all that, all our focus is there as well. It's a combination of a few things and those are at least 2 things that really contribute to it.

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

Yes. Hey, Jason, it's Brandon. So cost of services I think was a little down, roughly flat to the prior quarter. And the biggest chunk of cost of services is the creator incentive costs, right? Which are the commitments that we've made and the minimum guarantees that we've been talking about, which will be coming off as we said at the end of -- at the end of 2024, that's when they'll be meaningfully coming down. So they'll continue to be in there for the next few quarters and then that's when they start coming off. So that's -- that's just part of the business plan with respect to the commitments on the -- on the content acquisition strategy.

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, sorry, moderation on the platform?

Yes. Tom, so 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 -- have done is relied on a lot of technology to flag and remove content. Whereas we -- we want to be a little bit more particular about that and have real human eyes on something and not rely on something that isn't, hasn't proved out to be 100% accurate. So when it comes to AI and the moderation side, we haven't implemented anything of that sort and we have no current plans to implement anything of that sort.

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

Yes. So at this point, when looking at AI and artificial intelligence on the Rumble side, obviously video is a massive contributor to AI models. It's not something that we're doing and it's not something that we're in. Additionally, I think a first step for Rumble when it comes to any sort of machine learning or any sort of recommendations will be in terms of making sure that we deliver content that people want after a video is done. We're not going to be adopting a new feed based on AI, not anytime soon for a lot of various reasons. But when it comes to surfacing content and helping drive watch time, I think there's things that we could do on the recommendation side, but I want to be very careful on how we do that, and what we do just based on what we currently see and what our audience really want. So I want to make sure we deliver what they want more than what other companies are doing.

Excellent. Last question. So, can you give your current thoughts on the regulatory efforts across the globe when it comes to Internet broadly and free speech more specifically, including those in Canada?

Yes. So when it comes to obviously in the United States, the First Amendment is the most important. It is there. So it's critically important to us and obviously puts a really big safeguard for what we do. When it comes to other jurisdictions like France or China or North Korea, it's obviously murky. Those aren't markets that we're participating in. And when it comes to Canada, obviously we're hoping that things will change in Canada. We're not really sure on how the laws in Canada will play out. So it's still a wait and see moment for us in terms of how they will enforce and what they plan to enforce and what they plan to do. It's very early stage in Canada and with many other markets. But when it comes to the U.S., that's kind of where our bread and butter is at this moment. And we've challenged things like in the New York state when they tried to push back on the First Amendment. And we've been very successful there in overturning that and obviously now it's an appeal. And we'll continue to push forward on that in the United States alongside the First Amendment.

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

Just a few more. So can you talk about what drove I think -- hold on a second. Nope. I'm good on that question. Okay. So the next question, how should we think about Rumble Cloud impact on either gross profit or EBITDA over the next 12 months? I mean, just like broadly. I mean, is this entirely just selling excess capacity? Are there going to be additional costs? But it'll still be like accretive from a financial standpoint. That one. And then I'll just do one more after that.

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's disclosure requirements around that surrounding non-GAAP metrics. And so we'll develop the appropriate set of metrics around this and communicate that during 2024. But at this time, we haven't defined it nor are we giving guidance on the timing of that specifically.

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

No, I think we said we're heading towards breakeven in 2025. As these expenses that I was mentioning earlier, as these creator commitment expenses start coming off and revenue starts to scale, that's when we start heading towards the breakeven timeframe, which we expect to happen in 2025.

So basically, you're trying to say that you will see an improvement in 2025 as a marginal level, but there's no commitment to absolute levels at this point?

We expect we will 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.