Rumble Inc. — Q2 2023 Form 10-Q
Reporting period: Three and six months ended June 30, 2023. The filing identifies the registrant as Rumble Inc. (Nasdaq: RUM; warrants: RUMBW); “RUM Group Inc.” is not the registrant name shown in the filing. Figures are in U.S. dollars.
Business context
Rumble operates a video-sharing and video-technology platform, generating revenue mainly from advertising and licensing, with other revenue from subscriptions, tipping, cloud and platform-hosting services. On May 15, 2023, it acquired podcasting and livestreaming platform CallIn for provisional total consideration of $18.1 million.
Financial performance
| Metric | Q2 2023 | Q2 2022 | Six months 2023 | Six months 2022 |
|---|---|---|---|---|
| Revenue | $25.0 million | $4.4 million | $42.6 million | $8.4 million |
| Cost of services | $40.8 million | $4.2 million | $66.9 million | $7.9 million |
| Operating loss | $34.9 million | $4.7 million | $58.5 million | $8.6 million |
| Net loss | $29.5 million | $4.7 million | $58.1 million | $8.6 million |
| Operating cash flow | Not presented by quarter | $(34.5) million | $(9.3) million |
Advertising revenue was $20.2 million in Q2, up from $2.2 million; licensing and other revenue was $4.7 million, up from $2.2 million. Cost of services exceeded revenue by $15.9 million in Q2 and $24.3 million in the first half. These amounts imply negative revenue-less-cost-of-services margins of approximately 64% and 57%, respectively; the filing does not present a formal gross-margin measure. Q2 basic and diluted loss per share were each $0.15, versus $0.03 a year earlier; first-half loss per share was $0.29, versus $0.05.
At June 30, cash and cash equivalents were $295.6 million and marketable securities were $1.1 million, down from $337.2 million of cash and cash equivalents at year-end. Current assets were $319.2 million and current liabilities $38.8 million, implying working capital of approximately $280.4 million. The filing reports no conventional borrowings; liabilities include $1.1 million of lease liabilities, a $16.9 million warrant liability, and $3.1 million of contingent consideration. The company used $7.0 million in investing activities, including capital and intangible-asset purchases, during the first half.
Changes versus comparable periods
- Revenue rose 468% in Q2 and 404% in the first half year over year, with management attributing advertising growth to newer creator, publisher and advertiser solutions, including host-read ads and the Rumble Advertising Center.
- Cost of services rose faster than revenue: 876% in Q2 and 744% in the first half, primarily due to higher programming and content costs. First-half net loss widened to $58.1 million from $8.6 million.
- Average Q2 monthly active users were 44 million, flat year over year and down 8% from Q1 2023. Estimated monthly minutes watched rose 46% year over year to 11.8 billion; uploaded video averaged 13,229 hours per day, up 48%.
- Cash used in operating activities increased to $34.5 million from $9.3 million in the first half. Cash declined by $41.6 million during the period.
Outlook, risks and unusual items
- No quantitative revenue, earnings or cash-flow guidance is provided. Management says its priority is growing users and usage and testing monetization, rather than maximizing near-term revenue or profitability, and expects substantial investment and expense growth.
- Content commitments are significant. MD&A cites $148 million of minimum programming and content commitments, while the financial-statement note reports approximately $154 million of minimum contractual cash commitments, primarily for content, leases and services. The filing also notes potentially substantial variable content costs.
- One customer represented 58% of Q2 revenue and 56% of first-half revenue. One customer was 54% of accounts receivable at June 30; the company says that balance was collected in July.
- CallIn acquisition accounting remains provisional. The acquired business generated $11.8 million of provisional goodwill; certain consideration depends on retention and development milestones. The company recorded a $0.4 million gain from the change in fair value of contingent consideration.
- Warrant remeasurement produced a $6.8 million loss for the first half, partly offset by a $1.5 million gain in Q2. Interest income was $6.9 million for the first half, reflecting cash balances following the business combination.
- Disclosed litigation includes a shareholder claim alleging damages of $419 million, a patent-infringement suit and a putative Video Privacy Protection Act class action. Rumble says it is defending the claims and considers payment to plaintiffs remote, but the outcomes are uncertain. It is also pursuing antitrust litigation against Google.
- Other risks include fixed creator-payment obligations that may not fall if audience or revenue targets are missed; privacy, cybersecurity and content-related liability; competition; and potential effects of new online-content and paid-endorsement regulation.
Important facts for investors to verify
- Reconcile the $148 million and approximately $154 million content-commitment disclosures, and assess timing, variable costs and cash-flow implications.
- Review customer concentration and whether advertising growth can broaden across customers and sustain monetization.
- Assess whether user engagement and uploaded content growth translate into revenue while cost of services and creator commitments remain elevated; note that management cautions MAU and viewing estimates have measurement limitations and may include undetected inauthentic activity.
- Track CallIn integration, final purchase accounting, and the conditions and potential dilution associated with contingent shares and other equity awards.
- Monitor developments in the disclosed lawsuits and regulatory matters, including the potential exposure from the $419 million shareholder claim; the filing does not provide a clear estimate of ultimate losses.