fuboTV fubo Q2 2024 Earnings Presentation

thank you for standing by at this time I would like to welcome everyone to today's fubo TV second quarter 2024 earnings conference call all lines have been placed on mute to prevent any background noise after the speaker remarks there will be a question and answer session if you'd like to ask a question during this time simply press star on your telephone excuse me star one on your telephone keypad once again star one thank you I would now like to turn the call over to Amit Pate senior Vice Pres president of fpna corporate developments and investor relations Amit please go ahead thank you for joining us to discuss fubo second quarter 2024 results with me today is David gandler co-founder and CEO of fubo and John zenas CFO of fubo full details of our results and additional management commentary are available in our earnings release and letter shareholders which can be found on the investor relations section of our website at ir. fubo.tv before we begin let me quickly review the format of today's call David is going to start with some brief remarks on the quarter and our business and John will cover the financials and guidance then we will turn the call over to the analysts for Q&A I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal Securities laws including but not limited to statements regarding our financial condition anticipated financial performance business strategy and plans industry and consumer Trends anti-competitive practices among our competitors and our response plan including our antitrust lawsuit and expectations s regarding profitability these forward looking statements are subject to certain risks uncertainties and assumptions important factors that could cause actual results to differ materially from forward looking statements include those discussed in our filings with the SEC except as otherwise noted the results and guidance we're presenting today are on a continuing operation basis excluding the historical results of our former gaming segment which we are accounted for as discontinued operations in addition our guidance and other commentary with respect to fba's financial condition and our anticipated financial performance in future periods do not reflect any potential impact of the launch of the sports streaming joint venture between the Walt Disney Company Fox Corporation and Warner Brothers Discovery including the outcome of our Anti-Trust lawsuit risks related to this joint venture and the litigation are described in further detail in the company's SEC filings during Q&A the company will not address any questions related to ongoing litigations including this matter during the call we may also refer to certain non-gaap Financial measures reconcil ations of these non-gaap measures to the most directly comparable Gap measures are also available in our Q2 2024 earnings shareholder letter which is available on our website at ir. fubo.tv with that I will turn the call over to David thank you Amit and good morning everyone we appreciate that you've joined us today to discuss fubo second quarter 2024 results our second quarter continued our strong start to 2024 and the momentum we have achieved since becoming a publicly traded company in 2020 the second quarter marked our sixth consecutive quarter of global year-over-year improvement in our profitability metrics while in North America we exceeded expectations in North America we closed the second quarter with double digigit year-over-year growth posting $382.92 in total revenue an increase of 26% year-over-year and 1.45 million paid subscribers up 24% year-over-year our ad business also remains strong ending the quarter with $25.8 million in Revenue an increase of 14% year-over-year alongside this growth we are making great strides on our path to profitability with meaningful year-over-year improvements in net loss adjusted Eva Dot and free cash flow which John will discuss in more detail this progress gives us continued confidence in our ability to execute with all teams at fubo operating at the highest levels note that our profitability goals exclude the potential impact of the sports streaming joint venture in addition to our robust operational execution we were agile and opportunistic in managing our balance sheet in Q2 2024 we repurchased $ 46.9 million of convertible debt at an average price of 56.6% of par value to fund these repurchases we issued stock at a128 under our ATM program achieving an impressive net effective issuance price of $226 cents that's an outstanding 77% premium this strategic move not only enhanced shareholder value by reducing outstanding debt but also boosted our financial flexibility and mitigated dilution these actions further underscore our confidence in our go forward plan as well as our commitment to driving business growth and shareholder value pubo is focused on delivering value and expanding our relevancy to consumers in a fast changing environment consumers benefit from a market with healthy competitive Dynamics we continue to fight for competition and better prices in a market in disruption contrasting with the Walt Disney Company Fox Corporation and Warner Brother 's Discovery their JV attempts to circumvent the need for regulatory approval while still giving these Partners control of 80% of the premium Sports Market the JB claims to solve the issue of bulky cable bundles but we believe its primary goal is to limit competition boosting Partners profits synthetically and leading to steep price hikes for consumers similar to those seen with their esod services consumers passionate about sports content but frustrated with high prices and inflexible bundles need multiple streaming options with competitive pricing fubo like all Distributors have the right to fairly compete in the sports streaming Market a fair market would force the JB Partners to compete against each other in the licensing of sports channels to payv platforms virtual and traditional as well as with other Market participants further Downstream in the distribution space this will Foster competition I benefiting customers with better prices and choices our preliminary injunction hearing to prevent the jv's launch goes before the US District Court southern district of New York starting today we appreciate the support we have received from across the Spectrum we continue to be encouraged by earlier reports that the Department of Justice is looking into the JV and an increasing number of high-profile Capitol Hill lawmakers public interest groups and other content Distributors are alarmed and have weighed in on the negative impact that JV would have for consumers we continue to strongly believe in the merits of our case and look forward to going before the judge this week meanwhile we remain focused on delighting our consumers with a seamless and Innovative product that Aggregates a portfolio programming at compelling price points in recent months we've seen media companies increasingly turn their streaming services into app stores requiring consumers to log into different apps and stream from multiple interfaces to access content while these companies are characterizing this approach as consumer friendly users are still feeling the same pain Point friction therefore we have every indication that our super aggregation strategy is the right one as we believe the best consumer experience is frictionless with multiple bundles from skinny to Fat to choose from as a super aggregator our vision is to offer users the premium content they love all within the fubo ecosystem differentiating our service from the so-called soft bundles on the market in the second quarter we launched the fubo free tier the first layer in our super aggregation model fubo free offers nearly 200 free ad supported streaming television or fast channels and is currently available to certain former fubo paid and free trial subscribers fubo free users can reactivate their paid subscriptions at any time which they may choose to do as their favorite sports Seasons return to play Early results are encouraging and we may expand fubo free to other cohorts in the future we plan to further build out our tiered offering with Standalone content that does not require the purchase of the main fubo product this content can range from svod to pay-per-view and Tad to skinny bundles we look forward to sharing more in the weeks and months ahead in closing the second quarter continued to demonstrate how fubo has grown efficiently as we balance our profitability goals while strategically investing in our business we remain focused on bringing consumers an aggregated Sports entertainment offering that delivers premium content and Innovative product features at the price point that's right for them and as I said last quarter we remain committed to a competitive streaming landscape that offers consumers Choice fair pricing and Innovation this is the vision upon which fuba was founded and is only achievable in a truly competitive market I will now turn the call over to John Janita CFO to discuss our financial results in Greater detail John thank you David and good morning everyone the second quarter saw a continuation of strong results and progress across just about every metric and in relation to our profitability goals these excellent results build on our strong momentum from the prior quarters and provide added proof that the initiatives and strategies we have implemented are having a positive impact on the earnings power of our business which we believe positions fubo for success in what remains a dynamic operating environment taking a look at the results for the quarter we continue to see healthy Topline and subscriber growth with global Revenue growing by over 25% year-over-year to 391 million driven by 26% growth in North America and 2% growth in rest of world the primary driver behind this continued Topline growth has been the ongoing robust increase in subscribers I am pleased to report overall subscriber growth of 24% year-over-year bringing North America subscribers to over 1.45 million and rest of world subscribers to over 399,000 as it relates to some of our key Revenue drivers and key areas of the business add Revenue during the second quarter totaled 26.3 million or a 14% increase versus the prior year period turning to the operational side of the business our actions around lowering expenses and increasing efficiency are having a positive impact on the business starting with gross margin we saw a 51 basis point year-over-year Improvement in gross margin to 133% marking our seventh con itive quarter of positive gross margin the progress we are making across our operational and expense line items led to a Q2 net loss of 25.8 million a significant Improvement compared to a net loss of 54.2 million in Q2 2023 these improvements resulted in a per share loss of 8 cents significantly improved compared to a loss of 19 cents in the second quarter of 2023 in Q2 adjusted APS loss was 4 cents and Improvement compared to an adjusted EPS loss of 12 cents in Q2 2023 adjusted eidat was1 million an improvement of 19.6 million compared to the second quarter of 2023 while adjusted EBA margin was- 2.8% a significant improvement from 9.8% in the prior year period in summary our results for this quarter as well as recent quarters highlight the significant progress we're making throughout the business notably we believe that the company's current trajectory demonstrates both its potential and resilience putting us in a strong position to achieve our profitability objectives in addition our ongoing effort to identify efficiencies and maximize leverage across the business resulted in a 40.5 million year-by-year Improvement and free cash flow we remain dedicated to upholding rigor and discipline and managing our companywide costs and are pleased with the progress we have achieved throughout the quarter moving to the balance sheet we entered the quarter with 161.5 million of cash cash equivalents and restricted cash we are confident that our liquidity will be adequate to invest in the business under our current operating plan while maintaining our trajectory toward profitability note that this excludes the potential impact of the ongoing Anti-Trust litigation including the launch of the sports streaming JV we have also taken proactive steps to optimize our capital structure in 2q we repurchased 46.9 million in face value of our 202 26 convertible notes at prices significantly below par value 19.9 million of which settled in July since the fourth quarter of 2023 we have reduced our level of debt outstanding by 80.2 million while also eliminating the potential delution associated with the repurchased convertible notes turning to our guidance our third quarter North America subscriber guidance is 1.65 million to 1.625 million subscribers representing 9% year-over-year growth at the midpoint while our third quarter Revenue guidance projects 360 million to 370 million representing 177% year-over-year growth at the midpoint on a full year basis our guidance for 2024 North America subscribers is 1.72 5 million to 1.74 million representing 7% year-over-year growth at the midpoint and for full year 2024 North American Revenue our guidance is from 1.57 billion to 1.59 billion representing 18% year-over-year growth at the midpoint both our full year subscriber and revenue guidance figures represent upward revisions to our previously shared F year guidance this guidance reflects our current exposure exposure to potential industry volatility and our commitment to maintaining discipline in subscriber acquisition costs relative to monetization however it does not account for any potential impact from the joint venture for rest of world we expect 397,000 to 42,000 subscribers in the third quarter representing a 3% year-over-year decline of the midpoint while our Revenue guidance projects 8 million to 9 million represent 1% year-over-year growth at the midpoint for the third quarter this leads to guidance of 395,000 to 45,000 subscribers for the full year 2024 representing a 2% year foryear decline at the midpoint and a full year 2024 Revenue guidance of 33 million to 35 million representing 4% youra growth at the midpoint as a reminder given the many unknowns related to the potential launch of the joint venture including the outcome of our lawsuit and the doj's investigation our guidance and other commentary regarding fba's Financial condition and anticipated financial performance in future periods do not reflect any potential impact of the joint venture to our business in closing I am pleased with our ability to post strong Topline results and equally strong subscriber growth while we recognize there's still much work to be done to capture the vast opport opportunities we see in front of us we're encouraged by our ability to improve just about every aspect of how we do business it is clear that our strategies to maximize revenue and improve operating efficiencies are working providing us with added confidence in our ability to deliver long-term value to our employees partners and shareholders I would now like to turn the call over to the operator for Q&A operator thank you and at this time I would like to remind everyone that in order to ask a question press star and the number one on your telephone keypad once again star one in the interest of time we ask that you please limit yourself to one question thank you and we will pause just a moment to compile the Q&A roster and it looks like our first question today comes from the line of Laura Martin with Needum Laura please go ahead good morning um my first one is about ads um could you give us an update on what's happening with cost per thousand and give us an update on uh looks like the growth slowed a little bit to 14% year-over-year could you give us an update on what's Happening generally in the ad market for you guys yeah sure Laura hey this is John so I I'd say a couple things so to your point on the ad side you posted call 134% growth um that was off of I'd say a seever percentage Point tougher comp relative to um the last year and so if you look at a two-year stack comp basis more or less was kind of the same growth rate uh on a two-year basis for both oneq and on 2q so I I'd start with that I'd also remind you that we have a a 34% comp in the third quarter um from a CPM perspective a couple things one is that you know I'm sure you've talked a lot about this around um what do cpms look like across the marketplace what I can tell you for us is that we continue to see strength as it relates to cpms in the sports Marketplace and so we're quite happy there as you know we're skewed more towards Sports than I think most um on the I'd say entertainment front particularly longell entertainment um there's a little bit of of CPM pressure that we're seeing currently all right thanks Laura and our next question comes from the uh line of Alicia Reese with wed Bush Alicia please go ahead hi guys thanks uh thanks for the question um if you could talk a little bit about your um your advertising performance in the quarter and um and also the um uh subscription uh retention that you expect to see in the third quarter with around the Olympics um I'd appreciate that yeah sure hey Alicia so look on the on the advertising side isn't the like we we were very pleased with the quarter maybe to give you a little bit more flavor just as a reminder we we built out the sales team that anniversary about a year or so ago and so the team's actually been sprinting since um on a categorical basis I would say the good news here is that our top five categories in terms of dollars also outperformed the overall portfolio meaning they're all above 14% And so you know among those in terms of strength we saw that within uh called Auto uh Ecom Financial Services food and beverage uh among others I'd say on a little bit on the softer side that included uh travel tourism and entertainment and Pharma as as it relates to the Olympics in general what I would tell you is that we be oneoff events that are short in nature for example the Olympics or say the Super Bowl those subscribers uh or corts tend to have less retentive value and so our marketing team doesn't aggressiv you pursue them all right thanks Alicia and our next question comes from the line of Jean Lee with evercore isi Jean please go ahead great uh thanks toon I want to kind of uh ask about the free app supporter service can you just give us a bit more details on you know the learning so far are you seeing it asy mooving in NATO on your turn uh or like retention profile and is that driving part part of the North America Subs sou perform this quarter and also if you can kind of just expand into your plans um to Road us out into uh more cohorts thanks a lot yeah sure so I think on the fast I'll roll in the premium discussion as well and so I think as you suggested we we launched our premium uh platform if you will uh mid to late way through the uh the second quarter at this time it's really for those who are end up churning out as a way to try to retain them I'd say at this point it's extraordinarily early I'd say we're pleased in terms of of the amount of Trials if you will or usage we're getting on the fre medium side I'd say too soon to call um what it means as it relates to to retentive aspects of this but and then I'd say more broadly speaking you know we're getting I'd say uh increasingly uh increasing ad growth as relates to that month to month and week to week so we're happy with what we're seeing there although it's also off of a small base broader more broadly speaking in terms of fast not that you asked this I would say that you know we're we're in call you 175 plus fast channels we continue to see very strong growth as relates to both viewership and advertising growth um specific to the Fast Business yeah I I'll just add uh one one piece on that is that you know with respect to uh the specific way in which that we've rolled out our um free service is that we're really focused as you said on the uh customers that are turning out and I think early indication we we're seeing some strong reactivation um but at the same time you know there's some more work that has to be done around Navy testing to really better understand how do we get more volume uh back into that funnel so um you know we'll be working on that for now but again early indications seem uh you know very compelling and um you know we'll probably put more resources behind that very soon and then see if it makes sense to begin to expand that out to other cohorts all right thanks for the question John and our next question comes from the line of David Joyce with cport research David please go ahead thank you uh congratulations on the balance sheet management uh you first of all um but second if you could please uh drill down on the you the strength of the the net ads in North America what were some real I guess content drivers there there were some other streamers obviously not virtual mvpds uh that had some issues in the in the quarter but um timing wise I was just wondering what was the drivers there yeah so David i' highlight a couple things one is that we we had some I'd say um sporting events that drove both trials and and also conversion if you will uh later in the quarter so that was one thing I would say the second thing I would say was that we you know as you know we dropped the water brother's Discovery content uh earlier in the quarter I would say we didn't see as as big of an impact as we would have expected there and then the third thing I guess as a result we also saw better than expected churn uh for the quarter two and then finally I would say you know you know we talked about our range in terms of sack and Sack came in i' say a bit below our Target as well I would just add that you know it was a very strong uh sports calendar generally speaking we had two major soccer events um and at the same time I think we've done a really nice job um you know marketing our our cricket championship as well as you know some some strong work behind the rsns adding YES Network and uh ensuring that there was continuity um you know with respect to some of the other um Regional Sports networks and baseball Seasons uh proven to be uh Stronger this year than it was last year for us all right thank you and our next question comes from the line of Jim Goss with Bearington research Jim please go ahead all right thank you um I wonder if you might comment on uh the potential impact of connect connected TV options on your Tam uh you know Vizio Walmart uh too and proprietary OEM efforts provide an option uh for consumers to get into some of of the services without using something else how do you view that as a competitive threat David you want to take that one yeah sry not sure I understood it sounded like uh you were saying how how are we competing with some of these other fast services are you saying on the fast side sorry if you could just rephrase yeah well the fact that if you buy certain televisions uh you'll you'll have an opportunity to gain access to a lot of the programming um in including a lot of the same sort of fast channels without having a service at all and I'm just wondering if that satisfies the needs of enough individuals that it's a it poses a competitive threat to you yeah well well the fast business for us is uh really complimentary uh about 7% of our viewership comes from Fast within the uh you know paid service and so if a consumer turns out they'll still have access to free channels um you know we have you know there's millions of people that come through the platform uh organically um every year so for us it's just it's just more you know uh incremental opportunities to engage consumers and really highlight the capabilities the features the the premium programming um that we have and the abundance of uh you know different um connected devices as you said I think the the interesting thing thing about fubo relative to all these oens is that you know most people they have multiple televisions in their homes you know call it two plus um they typically have you know different oems in different rooms and so having that seamless way in which that you can use fubo uh across different devices I think is extremely appealing and so um at this moment in time I look at them more as potential business development partners uh versus uh direct competitors all right thanks Jim and our next question comes from the line of nille aluru from JP Morgan nille please go ahead yeah hi thank you um you know David you touched on the sporting events I was wondering if you could potentially comment on what the retention effort looked like after that um for those subscribers given that you know that both those events ended before the end um I mean as you head into 3 key what the retention of those customers might be looking like um and then second just on the balance sheet um obviously great job with the opportunistic management is there anything you can tell us about kind of further expectations um for Capital um you know do you feel still feel confident you have the runway to you know break even without any additional Capital raises thank you why don't I start on the uh ni yeah John why don't I just close out on the uh on the first part uh and then you can take the second question um yeah so just on the uh retention piece you know look these are very large scale events that drive uh a lot of viewers and you know essentially the job of the of the service provider is to deliver that viewer The Experience they're looking for and so you the job typically is done we've seen this for many many years uh starting with the World Cup and 2018 uh you know this is why we wanted to add the uh uh the free service that um becomes available to churn out customers to make sure that we can continue to learn more about their viewing uh behavior and uh really focus on what it would take to re-engage them and have them reactivate their uh Services what I do think is important is that these customers will come back for Liga MX uh and a lot of the soccer programming that will return so um you know the team is doing the best job they can to retain you know still somewhat early uh to know but I will say that you know uh I don't think there's a really strong overlap between the um you know sort of soccer viewer the hardcore soccer fan uh and the Olympics so uh still early to say but you know we do expect that there could be some uh slight shurn associated with those events given the uh size of the cohort that came in and and Nick on on the capital so on the capital question what I would I'd say there is look as you'd expect I can't comment on what we may or may not do as it relates to the capital structure or our capital structure directly but what I can say is that we continue to believe that we are funded to execute on our operating plan excluding the potential impact of the JV and I would say that we are very sensitive to Sherer delution all right thanks for the question Nick and our next question comes from the line of Darren aahi with Roth Darren please go ahead good morning thanks for taking my question um just curious your marketing approach uh in the second half does anything change uh in light of the competitive landscape uh changing and then I guess uh is a dovetail question of that what kind of pricing power do you feel like you have uh given you've raised prices um in the past uh is that a strategy you think you'll employ going forward thanks look look on on the pricing side Darren what I would say is maybe one thing which is simply that I think the team's done an amazing job we've as you know we've raised prices now $5 this year I would say the term we've seen related to that has actually um been I'd say in line to probably better than we would have thought and so we think we still have some pricing power in the business um on can you go back to the first question oh he must have cut off what was it it was oh yeah um marketing tax right so on the marketing side it I would say like certainly the team has done I think a an outstanding job in terms of the first and second quarter um there will be some adjustments that they're making as it relates to the third quarter in terms of of driving subscribers certainly I'm not going to previe that today but when we get to the next quarter's earnings call we will share that with you all right thank you Darren and our final question today comes from the line of Brett noblock with caner Fitzgerald please go ahead hi guys thanks for for taking my question maybe on the sequential Improvement uh in subscriber related expenses could you maybe quantify how much of that came from uh removing one of brother's content off the platform or is there other factors that play there yes so on the subscriber related expense right to your point as you noted um we saw I think a few in basis point improvements uh year-over-year on the S line we also saw even greater improvement from the first quarter to the second quarter you know we don't get specific I think as you know as it relates to any specific piece of content uh but what I can tell you is what I'm consistent with what I said before is that we will continue to see Improvement in that line item going forward um and so expect to see that again in the third quarter and also in the fourth quarter but again I can't get more specific than that yeah I I would just add one more thing and uh you know I just don't want you think that it's you know it's just Discovery the discovery drop this is a combination of uh other uh activity um and other content negotiations that have transpired uh and just some uh some mix shift uh opportunities as well that came up uh just driving customers into different types of packaging so I think it's a culmination of things but certainly not uh specific to uh Warner Brothers alone all right thanks for the question Brett and that is all the questions we have today so ladies and gentlemen just want to let you know this concludes today's call thank you all for joining and you may now disconnect