Rumble Inc. — Q1 2023 Form 10-Q
Business context and period. Rumble Inc. operates a video-sharing and video technology platform, generating revenue primarily from advertising and licensing. This unaudited report covers the three months ended March 31, 2023, compared with the same period in 2022. The filing describes the company as focused on growing users and usage rather than maximizing near-term profitability.
Financial performance and liquidity
- Revenue: $17.6 million, up 336% from $4.0 million. Advertising contributed $14.3 million; licensing and other revenue contributed $3.3 million.
- Costs and margins: Cost of services was $26.0 million, exceeding revenue by $8.4 million (approximately negative 48% of revenue). Total expenses were $41.3 million. Operating loss was $23.6 million (approximately negative 134% operating margin).
- Net loss: $28.7 million, versus $3.9 million in Q1 2022; diluted loss per share was $0.14 versus $0.02. The 2023 loss included an $8.3 million non-cash warrant fair-value loss, partly offset by $3.3 million interest income.
- Cash flow: Operating cash use was $10.0 million, compared with $3.7 million. Investing cash use was $2.0 million, primarily for capital assets and intangible assets. Cash and cash equivalents declined $12.0 million during the quarter.
- Liquidity: At March 31, cash and cash equivalents were $325.2 million and marketable securities were $1.1 million, totaling $326.3 million. Current assets were $338.8 million and current liabilities $21.7 million.
- Debt and liabilities: The filing reports no conventional borrowing balance. Lease liabilities totaled approximately $1.2 million; warrant liability was $18.4 million. Accounts payable and accrued liabilities were $17.6 million.
- Other metrics: Average monthly active users were 48 million, up 17%; estimated monthly minutes watched were 10.8 billion, up 3%; uploaded video averaged 11,181 hours per day, up 82%. Management cautions that these engagement metrics are estimates and may include undetected spam or measurement limitations.
Material changes versus Q1 2022
- Revenue growth reflected higher advertising revenue (+$11.8 million) and licensing and other revenue (+$1.8 million), attributed to increased consumption and new advertising offerings.
- Cost of services rose $22.3 million, including a $21.1 million increase in programming and content costs. Total expenses increased 418%, outpacing revenue growth and contributing to a substantially larger operating and net loss.
- General and administrative expense rose to $6.9 million, primarily from staffing and public-company costs. Research and development and sales and marketing expenses also increased.
- Interest income increased to $3.3 million, reflecting the larger cash balance following the 2022 business combination. Q1 2022 included $0.8 million of business-combination finance costs; none were reported in Q1 2023.
- Cash and cash equivalents were $325.2 million at quarter-end versus $41.4 million a year earlier; the comparison reflects the substantial financing proceeds associated with the 2022 business combination.
Outlook, commitments, risks and unusual items
- Management expects to continue investing in content, platform development and growth, and anticipates expense categories will increase in absolute dollars. It prioritizes audience and usage growth over near-term profitability; the filing provides no numerical revenue or earnings guidance.
- At March 31, the company had approximately $62 million of minimum contractual cash commitments for programming and content. After quarter-end it entered additional agreements with $102 million of minimum commitments, for approximately $164 million in total. A significant portion is payable over 12 to 48 months from 2023. Additional variable content costs may be substantial.
- The filing separately reports approximately $68 million of minimum contractual cash commitments at March 31, primarily for programming/content, leases and other services. Investors should review the commitment disclosures to understand overlap and scope.
- Customer concentration is significant: one customer represented 52% of Q1 revenue and 58% of quarter-end receivables. The filing says the receivable was collected in April 2023.
- Legal matters include a shareholder lawsuit seeking rescission or alleged damages of $419 million, a patent suit, and a putative Video Privacy Protection Act class action. The company says it is defending the claims and considers payment likelihood remote, while acknowledging outcomes are uncertain. Its antitrust case against Google remains in discovery; trial was scheduled for November 2024.
- On May 15, 2023, the company acquired CallIn Corp.; purchase consideration and acquired asset/liability fair values were still being evaluated. The company also identifies risks from fixed creator payments, competition, content moderation and regulation, privacy and cybersecurity, and its ability to monetize growth.
- Warrant remeasurement produced an $8.3 million non-cash loss. The company had 8.05 million liability-classified warrants outstanding at a weighted-average exercise price of $11.50.
Key facts for investors to verify
- Whether advertising and other monetization growth can keep pace with content, hosting and operating costs, and what level of continuing cash burn management expects.
- The timing, enforceability and performance assumptions behind the approximately $164 million of minimum content commitments, as well as potentially substantial variable obligations.
- The durability and diversification of revenue, particularly the effect of the largest customer’s concentration and the status of its collected receivable.
- Progress in converting MAU and viewing growth into sustainable revenue, considering management’s disclosed limits on metric measurement and spam detection.
- Developments and potential financial exposure in the disclosed litigation, including the shareholder claim alleging $419 million in damages.
- The financial and strategic terms of the CallIn acquisition once purchase accounting is completed.