Rumble Inc

Previous wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with Rumble Inc.’s (“Rumble” or the “Company”) unaudited condensed consolidated interim financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report and those discussed in our other filings with the SEC. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.

Current wording

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated interim financial statements and the related notes included in Item 1 of Part I of this Quarterly Report on Form 10-Q and with our audited consolidated financial statements and related notes included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2023. This discussion contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from such forward-looking statements. Factors that could cause or contribute to those differences include, but are not limited to, those identified below and those discussed in the sections titled “1A. Risk Factors” and “Cautionary Note Regarding Forward-Looking Statements” included elsewhere in this Quarterly Report and those discussed in our other filings with the SEC. Additionally, our historical results are not necessarily indicative of the results that may be expected in any future period. Amounts are presented in U.S. dollars.

Previous wording

Advertising fees are generated by delivering digital video and display advertisements as well as cost-per-message-read advertisements. Digital video and display advertisements are placed on Rumble and third-party publisher websites or mobile applications. Customers pay for advertisements either directly or through relationships with advertising agencies or resellers, based on the number of impressions delivered or the number of actions such as clicks, or purchases taken, by our users.

Current wording

Audience Monetization includes: advertising fees on the Rumble platform; subscription fees earned primarily from consumer product offerings such as Locals and badges; revenues generated from content that is licensed by third-parties; pay-per-view; and fees from tipping and platform hosting fees. Advertising fees are generated by delivering digital video and display advertisements as well as cost-per-message-read advertisements. Digital video and display advertisements are placed on Rumble websites or mobile applications. Customers pay for advertisements either directly or through relationships with advertising agencies or resellers, based on the number of impressions delivered or the number of actions such as clicks, or purchases taken, by our users.

Previous wording

Other income (expense) consists of miscellaneous income earned outside of normal company revenue as well as foreign exchange gains and losses on transactions denominated in currencies other than the U.S. dollar.

Current wording

Other income (expense) consists of miscellaneous income earned outside of normal company revenue as well as foreign exchange gains and losses related to gains and losses on transactions denominated in currencies other than the U.S. dollar.

Previous wording

Income and deferred tax recovery (expense) consists of the estimated federal, state, and foreign income taxes incurred in the U.S. and other jurisdictions in which we operate.

Current wording

Income tax benefit (expense) consists of the estimated federal, state, and foreign income taxes incurred in the U.S. and other jurisdictions in which we operate.

Previous wording

MAUs (GA4) represent the total web, mobile app, and connected TV users of Rumble for each month,4 which allows us to measure our total user base calculated from data provided by Google.5 Connected TV users were not counted within MAUs within MAUs (UA) for periods prior to July 1, 2023, and we believe that the number of such users was immaterial in those prior periods. We also believe that fewer than 1 million MAUs in the current period are from connected TV, making them similarly immaterial. Google’s parameters for measuring “active users” appear to exclude many, but not all, users who access content on Rumble through “embedded” videos on domains other than rumble.com, and we are unable to determine the exact number of users who access “embedded” content within our total number of MAUs. In addition, MAUs (GA4) may rely on statistical sampling and may be based on estimates of data that Google is missing “due to factors such as cookie consent.”6

Current wording

MAUs (GA4) represent the total web, mobile app, and connected TV users of Rumble for each month,4 which allows us to measure our total user base calculated from data provided by Google.5 Connected TV users were not counted within MAUs within MAUs (UA) for periods prior to July 1, 2023, and we believe the number of such users was immaterial in those prior periods. We also believe that fewer than 1 million MAUs in the current period are from connected TV, making them similarly immaterial. Google’s parameters for measuring “active users” appear to exclude many, but not all, users who access content on Rumble through “embedded” videos on domains other than rumble.com, and we are unable to determine the exact number of users who access “embedded” content within our total number of MAUs. In addition, MAUs (GA4) may rely on statistical sampling and may be based on estimates of data that Google is missing “due to factors such as cookie consent.”6

Previous wording

As with our earlier MAU reporting, there is a potential for minor overlap in the resulting data due to users who access Rumble’s content through the web, our mobile apps, and connected TVs in a given measurement period; however, given that we believe this minor overlap to be immaterial, we do not separately track or report “unique users” as distinct from MAUs. Our reported MAUs do not include users of Locals. We also do not separately report the number of users who register for accounts in any given period, which is different from MAUs.

Current wording

As with our earlier MAU reporting, there is a potential for minor overlap in the resulting data due to users who access Rumble’s content through the web, our mobile apps, and connected TVs in a given measurement period; however, given that we believe this minor overlap to be immaterial, we do not separately track or report “unique users” as distinct from MAUs. Our reported MAUs have not historically included users of Locals, however, starting in mid-May 2024, Locals users began using Rumble’s single sign-on technology to access their account, which we expect will reduce the number of Locals users not included in our Rumble MAU reporting. We also do not separately report the number of users who register for accounts in any given period, which is different from MAUs.

Previous wording

MAUs (GA4) were 50 million on average in the first quarter of 2024, a decrease of 25% from the fourth quarter of 2023. We believe that the decrease from the fourth quarter of 2023 is attributable to the fourth quarter’s increased interest in geopolitical events, high profile seasonal sporting events and increased interest in certain Rumble content creators, in each case relative to the first quarter of 2024.

Current wording

MAUs (GA4) were 53 million on average in the second quarter of 2024, an increase of 6% from the first quarter of 2024. We believe that the increase from the first quarter of 2024 is attributable to an increased interest in political news in the second quarter of 2024.

Previous wording

We use estimated MWPM as a measure of audience engagement to help us understand the volume of users engaged with our content on a monthly basis and the intensity of users’ engagement with the platform. Estimated MWPM represents the monthly average of minutes watched per user within a quarterly period, which helps us measure user engagement. Estimated MWPM is calculated by converting actual bandwidth consumption into minutes watched, using our management’s best estimate of video resolution quality mix and various encoding parameters. We continually seek to improve our best estimates based on our observations of creator and user behavior on the Rumble platform, which changes based on the introduction of new product features, including livestreaming. We are currently limited, however, in our ability to collect data from certain aspects of our systems. These limits may result in errors that are difficult to quantify, especially as the proportion of livestreaming on the Rumble platform increases over time, and as we improve the quality of various video formats by increasing bit rates.

Current wording

We use estimated MWPM as a measure of audience engagement to help us understand the volume of users engaged with our content on a monthly basis and the intensity of users’ engagement with the platform. Estimated MWPM represents the monthly average of minutes watched within a quarterly period, which helps us measure user engagement. Estimated MWPM is calculated by converting actual bandwidth consumption into minutes watched, using our management’s best estimate of video resolution quality mix and various encoding parameters. We continually seek to improve our best estimates based on our observations of creator and user behavior on the Rumble platform, which changes based on the introduction of new product features, including livestreaming. We are currently limited, however, in our ability to collect data from certain aspects of our systems. These limits may result in errors that are difficult to quantify, especially as the proportion of livestreaming on the Rumble platform increases over time, and as we improve the quality of various video formats by increasing bit rates.

Previous wording

Estimated MWPM was 8.6 billion on average in the first quarter of 2024, a decrease of 18% from the fourth quarter of 2023. We believe that the decline from the fourth quarter of 2023 was due to the majority of our bandwidth consumption moving from third-party service providers’ content delivery networks (“CDNs”) to our own proprietary CDN. Based on preliminary testing, our own CDN indicates less bandwidth consumption than one of our service providers’ CDNs for comparable user activity. Because we calculate estimated MWPM by converting bandwidth consumption into minutes watched, consumption measured through our own CDN yields a lower estimated MWPM than when measured through that service provider’s CDN.

Current wording

Estimated MWPM was 8.5 billion on average in the second quarter of 2024, a decrease of 1% from the first quarter of 2024. We believe that the decrease from the first quarter of 2024 was due to our bandwidth consumption moving from third-party service providers’ content delivery networks (“CDNs”) to our own proprietary CDN, offset by an increased interest in political news in the second quarter of 2024. Based on preliminary testing, our own CDN indicates less bandwidth consumption than one of our service providers’ CDNs for comparable user activity. Because we calculate estimated MWPM by converting bandwidth consumption into minutes watched, consumption measured through our own CDN yields a lower estimated MWPM than when measured through that service provider’s CDN.

Previous wording

We use the amount of hours of uploaded video per day as a measure of content creation to help us understand the volume of content being created and uploaded to us on a daily basis. Hours of uploaded video per day were 12,429 on average in the first quarter of 2024, representing an increase of 11% from the first quarter of 2023 and a decrease of 1% from the fourth quarter of 2023. As previously disclosed, we believe hours of uploaded video per day have been depressed by YouTube’s decision in the fourth quarter of 2023 to disable the ability of its users to utilize our tool that automatically imports videos from creators’ YouTube channels to their Rumble channels, commonly known as the “YouTube sync” tool. We provided additional information about this issue in a current report on Form 8-K, filed with the SEC on January 16, 2024.

Current wording

As previously disclosed, we believe hours of uploaded video per day have been depressed by YouTube’s decision in the fourth quarter of 2023 to disable the ability of its users to utilize our tool that automatically imports videos from creators’ YouTube channels to their Rumble channels, commonly known as the “YouTube sync” tool. We provided additional information about this issue in a current report on Form 8-K, filed with the SEC on January 16, 2024.

Previous wording

The following table sets forth our condensed consolidated interim statements of operations for the three months ended March 31, 2024 and 2023 and the dollar and percentage change between the two periods:

Current wording

The following table sets forth our unaudited condensed consolidated interim statements of operations for the three months ended June 30, 2024 and 2023 and the dollar and percentage change between the two periods:

Previous wording

Cost of services increased by $5.8 million to $31.8 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was due to an increase in programming and content costs of $5.3 million, hosting expenses of $0.1 million, and other service costs of $0.4 million.

Current wording

Cost of services decreased by $5.2 million to $35.7 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was due to a decrease in programming and content costs of $5.6 million, offset by an increase in other cost of services of $0.4 million.

Previous wording

Sales and marketing expenses decreased by $39.0 thousand to $3.3 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was due to a slight reduction in marketing and public relations activities, offset in part by an increase in payroll and related expenses and consulting services.

Current wording

Sales and marketing expenses increased by $2.6 million to $6.3 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was due to an increase in marketing and public relations activities of $1.8 million as well as payroll and related expenses of $0.8 million.

Previous wording

Amortization and depreciation increased by $1.7 million to $2.4 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was due to an increase of $0.6 million from depreciation on our property and equipment as we continue to build out our infrastructure as well as an increase in amortization from intangible assets of $1.1 million.

Current wording

Amortization and depreciation increased by $2.5 million to $3.6 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The increase was due to an increase of $1.0 million from depreciation on our property and equipment as we continue to build out our infrastructure as well as an increase in amortization from intangible assets of $1.5 million.

Previous wording

Change in fair value of contingent consideration increased by $1.3 million resulting in a loss of $1.3 million for the three months ended March 31, 2024. The contingent consideration liability arose in connection with the Callin acquisition and the fair value of this contingent consideration was measured using the fair value of the expected number of shares to be issued and Company’s share price at closing. The loss from the change in fair value of contingent consideration was directly attributable to changes in the Company’s share price since the closing.

Current wording

Change in fair value of contingent consideration increased by $0.4 million resulting in a loss of $18 thousand for the three months ended June 30, 2024. The contingent consideration liability arose in connection with the Callin acquisition and the fair value of this contingent consideration was measured using the fair value of the expected number of shares to be issued and Company’s share price at closing. The gain/loss from the change in fair value of contingent consideration can be directly attributable to changes in the Company’s share price since the closing and the probability of contingencies being met.

Previous wording

Interest income decreased by $0.8 million to $2.5 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The decrease was due to the fact that the Company invested less in money market funds, treasury bills, and term deposits.

Current wording

Interest income decreased by $1.4 million to $2.2 million in the three months ended June 30, 2024 compared to the three months ended June 30, 2023. The decrease was due to the fact that the Company invested less in money market funds, treasury bills, and term deposits.

Previous wording

General and administrative expenses increased by $0.7 million to $9.3 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was due to an increase in payroll and related expense of $0.1 million and share-based compensation of $2.3 million, offset in part by a $1.7 million decrease in other administrative expenses. The $2.3 million increase in share-based compensation was related to the recognition of contingent shares issued in connection with the Callin acquisition that were accounted for as a post-combination expense as well as the expense of previously and newly granted restricted stock units and stock options for certain employees and executives. The remaining $1.6 million decrease in other administrative expenses was mainly driven by public company-related costs, including accounting, legal, investor relations, insurance, and other administrative services.

Current wording

General and administrative expenses increased by $1.9 million to $19.7 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was due to an increase in payroll and related expenses of $0.9 million, share-based compensation of $2.6 million, offset by a decrease in other administrative expenses of $1.6 million. The $2.6 million increase in share-based compensation was related to the recognition of contingent shares issued in connection with the Callin acquisition that were accounted for as a post combination expense as well as the expense of previously and newly granted restricted stock units and stock options for certain employees and executives. The remaining $1.6 million decrease in other administrative expenses was mainly driven by public company-related costs, including accounting, legal, investor relations, and other administrative services.

Previous wording

Research and development expenses increased by $1.9 million to $4.5 million in the three months ended March 31, 2024 compared to the three months ended March 31, 2023. The increase was due to an increase in payroll and related expenses of $1.6 million, as well as a $0.3 million increase in costs related to computer hardware, software, and other expenses used in research and development related activity.

Current wording

Research and development expenses increased by $2.9 million to $9.8 million in the six months ended June 30, 2024 compared to the six months ended June 30, 2023. The increase was due to an increase in payroll and related expenses of $2.8 million, as well as a $0.1 million increase in costs related to computer software and hardware, and other expenses used in research and development related activity.

Previous wording

Change in fair value of warrant liability decreased by $2.4 million resulting in a loss of $10.7 million in the three months ended March 31, 2024. The warrant liability arose in connection with the warrants offered as part of the Business Combination. As these warrants meet the classification of a financial liability in accordance with ASC 815-40, the related warrant liability is measured at its fair value, determined in accordance with ASC 820, at each reporting period. The fair value of this warrant liability was measured using the fair value of the Company’s warrants listed on the Nasdaq. The decrease in the change in fair value of warrant liability is directly attributable to changes in the trading price of Rumble’s warrants.

Current wording

Change in fair value of warrant liability decreased by $6.1 million resulting in a loss of $0.7 million in the six months ended June 30, 2024. The warrant liability arose in connection with the warrants offered as part of the Business Combination. As these warrants meet the classification of a financial liability in accordance with ASC 815-40, the related warrant liability is measured at its fair value, determined in accordance with ASC 820, at each reporting period. The fair value of this warrant liability was measured using the fair value of the Company’s warrants listed on the Nasdaq. The decrease in the change in fair value of warrant liability is directly attributable to changes in the trading price of Rumble’s warrants.

Previous wording

As of March 31, 2024, our cash, cash equivalents, and marketable securities balance was $183.8 million. Cash, cash equivalents, and marketable securities consist of cash on deposit with banks and amounts held in money market funds, treasury bills, and term deposits.

Current wording

As of June 30, 2024, our cash, cash equivalents, and marketable securities balance was $154.2 million. Cash, cash equivalents, and marketable securities consist of cash on deposit with banks and amounts held in money market funds, treasury bills, and term deposits.

Previous wording

As we have consistently stated, we are using a substantial portion of funds to acquire content by providing economic incentives to a small number of content creators, including sports leagues. As of March 31, 2024, we had entered into programming and content agreements with a minimum contractual cash commitment of $76 million. A significant amount of these minimum contractual cash commitments will be paid over 12 to 36 months, commencing in 2024. In addition to the minimum contractual cash commitments, we have programming and content agreements that have variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate, however, these costs may be substantial.

Current wording

As we have consistently stated, we are using a substantial portion of funds to acquire content by providing economic incentives to a small number of content creators, including sports leagues. As of June 30, 2024, we had entered into programming and content agreements with a minimum contractual cash commitment of $55 million. A significant amount of these minimum contractual cash commitments will be paid over 12 to 36 months, commencing in 2024. In addition to the minimum contractual cash commitments, we have programming and content agreements that have variable cost arrangements. These future costs are dependent upon many factors and are difficult to anticipate, however, these costs may be substantial.

Previous wording

The following table presents a summary of the condensed consolidated interim statement of cash flows for the three months ended March 31, 2024 and 2023:

Current wording

The following table presents a summary of the unaudited condensed consolidated interim statement of cash flows for the six months ended June 30, 2024 and 2023:

Previous wording

Net cash used in operating activities for the three months ended March 31, 2024 primarily consisted of net loss adjusted for certain non-cash items, including a $12.1 million loss on the change in fair value of warrants and contingent consideration, partially offset by a $4.8 million changes in share-based compensation, $2.7 million changes in amortization and depreciation as well as changes in operating assets and liabilities. The increase in net cash used in operating activities during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was mostly due to an increase in expenses partially offset by changes in revenue and operating assets and liabilities.

Current wording

Net cash used in operating activities for the six months ended June 30, 2024 primarily consisted of net loss adjusted for certain non-cash items, including a $2.0 million loss on the change in fair value of warrants and contingent consideration, $8.6 million change in share-based compensation, $6.6 million changes in amortization and depreciation, $3.0 million changes in non-cash marketing expense, as well as changes in operating assets and liabilities. The increase in net cash used in operating activities during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was mostly due to an increase in expenses partially offset by changes in revenue and operating assets and liabilities.

Previous wording

Net cash used in investing activities for the three months ended March 31, 2024 consisted of $1.8 million in purchases of property, equipment, and intangible assets. The decrease in net cash used in investing activities during the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was mostly due to a decrease in purchases of property, equipment, and intangible assets.

Current wording

Net cash used in investing activities for the six months ended June 30, 2024 consisted of $5.3 million in purchases of property, equipment, and intangible assets as well as $3.8 million in cash paid in connection with the acquisitions of Callin and North River. The increase in net cash used in investing activities during the six months ended June 30, 2024 compared to the six months ended June 30, 2023 was due to an increase in purchases of intangible assets, offset by a decrease in purchases of property and equipment. Additionally, the increase in net cash used was related to cash paid to non-accredited investors related to the Callin acquisition and cash paid in connection with the North River acquisition in the six months ended June 30, 2024 as well as cash acquired in connection with the Callin acquisition in the six months ended June 30, 2023.

Previous wording

We prepare our condensed consolidated interim financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of condensed consolidated interim financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We evaluate our estimates on a continuous basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Current wording

We prepare our unaudited condensed consolidated interim financial statements in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of condensed consolidated interim financial statements also requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses and related disclosures. We evaluate our estimates on a continuous basis. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ significantly from the estimates made by our management. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations and cash flows will be affected.

Previous wording

We believe that the following key accounting policies require significant judgments and estimates used in the preparation of our condensed consolidated interim financial statements. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Accordingly, we believe that these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.

Current wording

We believe the following key accounting policies require significant judgments and estimates used in the preparation of our condensed consolidated interim financial statements. Critical accounting policies and estimates are those that we consider the most important to the portrayal of our financial condition and results of operations because they require our most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effects of matters that are inherently uncertain. Accordingly, we believe that these are the most critical to aid in fully understanding and evaluating our financial condition and results of operations.