Q4 2020 Fubotv Inc Earnings Call
With some brief remarks on the quarter into both strategy and familiar will cover the financials and guidance then I'm going to turn the call over to the analysts dig into Q&A before we begin I'd like to remind everyone that this call may contain forward looking statements, including statements about revenue non-GAAP net loss and adjusted EBITDA subscribers recent acquisition development of a wagering offering and other non historical statements.
As further described in our press release. These forward looking statements are subject to certain risks uncertainties and assumptions, including those related to <unk> growth evolution of our industry product development and success, our ability to realize the anticipated benefits of recent acquisitions, our access to capital and fund raising prospects to fund our ongoing operations, our ability to capitalize on market trends.
And develop and market, a wagering offering and general economic and business conditions, such as effects of industry market economic political or regulatory conditions future exchange and interest rates and changes in taxes and other laws regulations and policies, including the impact of COVID-19 on the broader market. These statements reflect our current expectations based on our beliefs assumptions and information.
<unk> currently available although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur. After this call description of these and other risks that could cause actual results to differ materially from these forward looking statements are discussed in our reports filed with the SEC, including our most recent quarterly and annual reports and a press release that was issued.
This afternoon during the call. We also refer to certain non-GAAP financial measures. These non-GAAP measures should be considered in addition to and not as a substitute for or in isolation from our GAAP results reconciliations with the most comparable GAAP measures are also available in our press release, which is available at IR docs Cubo dot TV with that I'll turn it over to David.
Thank you Britney and thank you all for joining us today I am very excited to present to you our Q4 and full year 2020 results.
The company has exceeded previously raised guidance with solid growth in revenue subscription and viewership.
Our mission is to provide the world's most thrilling sports first life to be experienced with the greatest breadth of premium content interactivity and wagering.
We believe crew boats, it's firmly at the intersection of three Megatrends the.
The secular decline of traditional TV.
The shift of TV AD dollars to connected devices.
Online sports wagering on <unk>.
Market opportunity, we believe to be complementary to our sports first live TV streaming platform.
Fourth quarter revenues were up 98% year over year exceeding for the first time $100 million of quarterly revenue.
For those who are new to provoke TV [noise] topline revenue consists of two primary revenue streams.
Description revenue, which was up 91% year over year from $47 9 million to $91 $4 million in advertising revenue, which was up 157% year over year from $5 1 million to $13 $1 million.
Paid subscribers at quarter end totaled 547880, and that's an increase of 73% year over year.
Given our sports first differentiated position, we experienced continued momentum from the start of the fall sports calendar that was back in Q3 and throughout Q4, adding an impressive 92800 net additions in the fourth quarter and that's up 237% from the prior year.
Sports draws premium audiences and advertisers are increasingly coming to us to reach highly engaged viewers.
For the full year advertising revenue grew to represent 11% of total revenues compared to 8% in the prior year, helping to contribute to a record adjusted contribution margin of 11, 7% in the fourth quarter and that's up 1100 basis points from the prior year.
We believe our sports focused market position will help to further grow our business and our Kpis continued to improve.
In 2020 average revenue per user per month increased 17% year over year to $62.84.
On the annualized ARPA increased by $109 to $754 per customer per year.
And within that annualized ARPA of $754, we grew advertising ARPA to $81.76 per customer per year, and that's an increase of 54% year over year, largely driven by an increase in per user engagement and investments in our advertising operations.
Our customers continue to be our number one focus and we continue to invest in our proprietary data to surface relevant content for our subscribers driving engagement and retention.
Our customer streamed over half a billion hours in 2020, that's an 82% increase year over year.
Equally noteworthy customer streamed an average of 7.2 hours of Foo Bo per day, indicating that we own significant timeshare in households.
Over the long term, we believe this level of daily engagement will provide numerous opportunities for us to further expand monetization on the platform.
We continue to invest in our product and into expanding access to more streaming devices such as Samsung TV. The next box in fact churn improved 56 basis points year over year in the fourth quarter and for the full year churn improved over 200 basis points over the prior year.
Only one quarter ago, I announced our intent to expand Fu bow into the online sports wagering market.
And I am very pleased to finally report that we've officially closed our acquisition of sports betting and interactive gaming company victory.
This acquisition enables us to accelerate the launch of our owned and operated sports betting platform called through both sports book.
We've secured our first market access deal for our sports book in Iowa Casino Queen.
And in connection with our launch in Iowa. We are also excited to announce agreements with major League baseball and the NBA to become authorized gaming operators for each week.
These agreements will provide access to official data and the rights to MLB and NBA League marks and logos within the fugu sports App once it's rolled out.
In addition to our sports book free to play predictive games, Mark the beginning of food most innovative gaming roadmap.
We believe it will enhance the sports streaming experience, while also providing a bridge between our video product and our sports book.
And we expect the integration of gaming with our expansive lives sports coverage will create a flywheel that improves engagement and retention and consequently drives advertising revenue.
In the third quarter of 2021, we plan to launch free gaming.
First of Kubota vs subscribers, and then later to all consumers and in the fourth quarter of this year, we expect to launch the <unk> Sports book.
We don't see wagering simply as an add on product of who bought TV and.
Instead, we believe there are significant synergies between streaming consumers, who enjoy wagering and wagering customers, who enjoy streaming live sports.
So in 2021 and beyond we are laser focused on bringing to life. Our vision of a streaming platform that transcends the industry's current virtual mvpds model and experience.
In conclusion, we are very proud of our 2020 results.
And as you've seen from our shareholder letter we are raising our 2021 guidance, we laid out for you last quarter.
The team is focused on delivering the best streaming experience to our customers, which will drive topline growth and the power of our model will enable us to further our progress on our path to profitability.
In 2021, we will continue to expand the breadth of our sports programming, while introducing interactivity and wagering to further differentiate our service in the marketplace.
And now I'll pass it over to Simona to discuss our 2020 financial highlights and guidance for 2021.
Simona thank.
Thank you David and good evening everyone.
Our strong performance in the fourth quarter exceeded our outlook and capped off a great year for football, we executed well and delivered record results before taking your questions I'll walk you through a few financial highlights and discuss our guidance for 2021 in the fourth quarter. We grew total revenue to went on to the $5 million an increase of 98% year on.
Area compared to food with D V. Pre merger. This growth was driven by continued strength in both subscription revenue, which increased 91 per cent and advertising revenue, which increased 157 per cent. It accounted for $12 four per cent of total revenue in the quarter.
Revenue for the full year was $269 million on a pro forma combined basis or two on the $61 5 million, excluding Facebook AG, an increase of 78 per cent compared to four Tvs pre merger in 2019 subscription revenue increased 73 per cent and advertising revenue was up 133 per se.
On accounting for 11% of reported revenue in 2020, we can see.
To focus on both the top line revenue growth as well as advancing on our path to strong sustainable sustainable margin in the long term.
On a full year basis, we reported a 10.1% positive adjusted contribution margin up from negative $3 one per se on in 2019, we believe that over the long term, we're well positioned to continue to drive year over year expansion. After our successful registered public offering in October 2020, and at least into the NYSE we fell.
The strength on our balance sheet in February with the issuance of $402 $5 million of senior convertible notes with a strong balance sheet, we plan to accelerate the investment in our team and further build our product development to continue to position the company for long term growth.
More broadly in 2021, we will continue to be focused on investing in and executing on our growth strategies, which include growing our subscriber base, increasing advertising on revenues and expanding into sports wagering.
Moving to our guidance after our strong performance in 2020, we are excited about our outlook for 2021, although we are very optimistic for what is in store for our future wagering business. Our guidance does not include any potential wagering revenue at this point in time.
Also a comparison of guidance could probably Oreo would refer to the combined pro forma full book television Facebook doesn't 'twenty numbers, excluding Facebook AG a business that we sold last year.
For the first quarter of 2021, we expect revenue between 101 and went on to $3 million. These represent a growth of 100% year over year at the midpoint of the range reflects the typical seasonality between Q4 and Q1 historically Q1 has been softer than Q4 when viewed sequentially on revenue is wireless.
Contribution margin seemed.
Similarly, we're guiding to Q1 and of the PTO subscribers or 522 530000 vs represents growth of 82% year over year at the midpoint.
For the full year, we're guiding to year end subscribers of 760 to 770000, an increase of 40% year over year at the midpoint of the range. We provided a strong subscriber growth combined with increasing expansion in advertising revenue give us confidence to increase our 2021 on revenue guidance to 460 to put on there.
$70 million up over 75 per cent year over year.
It is up or so from our private Scott previous guidance of $450 million to $435 million.
In conclusion, we're very excited about our growth opportunities and remain focused on driving long term expansion and profitability.
We'll now open it up for questions.
At this time, we're going to turn the call over to our analysts for Q&A session. Please try to limit yourself to two questions. So we have enough time for everybody to participate.
Our first question comes on Laura Martin of Needham. Please go ahead.
Hi, there great quarter, you guys and great outlook, let's start with gaming talk about the question I get most often from investors. The shareholder letter says that ultimately you want to integrate a wagering into two goes live television product. My question is after you work out the bottom. This is integrated into simple are you willing to license. This.
Tax to other either use it as a negotiating leverage to get content at a cheaper price from people like Comcast you could use it in their book of business are actually license it to people like charter that's sort of a big bundle and I don't really view as a competitor to virtual mvpds.
Well, thank you Laura.
Great question, and we do get this question often as well on for.
Our perspective right now, we're very focused on our direct to consumer business and we're trying to build a service that allows us to take advantage of the synergies on both the video and on the wagering side and.
And at the moment, we're building team that is really focused on adapting to the current video product and so for the foreseeable future. We will probably focus on our direct to consumer business, but I don't want to close the door to potential opportunities to work with other mvpds.
Could you one of the use of proceeds from our October IPO was the fact that you were going to hire lot salesman on.
To try to get the CPM up from $20, which is like the programmatic CTV seat cost per thousand 30 could you talk about your progress there on where you think you'll end the year in terms of cost per thousand per advertising yeah. So.
You know first of all we've done a tremendous job very quickly building up our advertising capabilities from Q3.
Through Q4, and as you saw from the shareholder letter, we finished the year with $8 and roughly 50 cents of that ARPA well above what we did even in the third quarter. As you recall political took up about 15% of that revenue. So we're able to replace that quite quite nicely. We continue to hire.
On the direct side and building up our sponsorship capabilities, but at the moment, we're still focused on programmatic. What's interesting about that is we have significant upside. If you think about our cpm's are still in the sort of 20 to $22 range, which gives us again enormous upside we've really been focused on Phil.
And just given the engagement levels that we're seeing we're starting to see actually more inventory, which is helping us take our time building out our team.
Thanks, very much great quarter, you guys. Thank you.
Thank you Laura our next question comes from Kevin Rippey of Evercore Kevin.
Oh, great. Thanks for taking the question guys.
My main one is as it relates to the revenue guidance you guys laid out for next year can you give us maybe a little bit more granularity about your expectations for.
Subscription <unk> relative to advertising.
You want me to start.
Okay.
Kevin first of all thank you for that I think the way you should think about 'twenty. One is similar to the way. We finished 2020. If you look at our subscriber growth subscriber ARPA grew at about 13% and advertising ARPA grew at 52% given the strength in the advertising business, coupled with you know.
Advertisers desire to access connected devices.
And then layered on top of that addressable 80, we're very confident that we'll continue to grow our advertising revenue well ahead of our subscription revenue on a per user basis.
Just to add on top of what David just mentioned I mean, we closed 2019 with advertising revenue roughly at 8% on thought that revenue 2020, we increased to 11% and we definitely see advertising to began on a more prominent part of our business in the longer term the tail winds are very strong right now.
Got it thanks, and then just on the subscriber growth guidance you guys have given can you give maybe a little granularity about expectations around gross addition relative to further churn improvements.
Yeah. So we've seen you know as you see in our guidance we are projecting in Q1, a little on the seasonality kicking in and kind of bringing on that last.
In a flat or a little down compared to Q4 2020, I'd use a much lower adoption that we experienced last year and we continue to assess opportunity to kind of increase.
These non but and look at it you know how to mitigate the seasonality on the longer term, we're still projecting a strong growth in our subscriber that have you seen and as you know we're laser focused on addressing opportunities to drive efficiently the marketing push to return subscriber growth that allow us to kind of de lever.
Prove results just to add to that Kevin.
Oh, you know 2019.
The slope, it which we deteriorated from Q4.
On to Q1 was roughly about 9% and this year, we are projecting to be about 4% below Q4 and that was a very strong <unk>.
Fourth quarter. So we're very happy about the you know the early trends in January obviously, we don't have we're not we're not done with the quarter, yet, but you know momentum was strong we feel very good and that allowed us to sort of.
Take up our guidance a little bit.
Great. Thanks, guys. Thank.
Thank you thank you Kevin.
Our next question comes from Jason <unk> of Oppenheimer go ahead.
And I'll ask you first on <unk>.
Video on maybe help us a little bit how you're thinking about 2022 non-GAAP contribution profit, maybe just perhaps a margin range and then second I think I really.
Incurs the.
Registration around.
Ali worst day.
How does that impact your outlook it doesn't allow you to get market share.
Okay.
So in terms of the adjusted contribution margin. Thank you Jayson.
That's the contribution margin, we don't provide guidance at this point about these metrics, but you know, we're clearly very focused on expanding our business focusing on growth with an eye to ensure that we continue to improve in our path to profitability delivering any year over year improvement of our margins. So our sequential growth you can change your interest.
The seasonality on a year over year basis, we continue to grow the business and return more value to the shareholder knowing though however that you know between wagering on potentially either alternative either acceleration opportunities. We may decide to invest for finished and are more quickly in the next few quarters to accelerate future growth.
And then on the island.
Sorry go ahead, I, just I couldn't hear that second the second part of it.
No I. We're recently ended in person registration for online gaming.
And which would make it easier.
Can you just talk about how does that impact your outlook you can kind of come to market. There maybe sooner now net policy gene yeah. So.
Obviously I'm not prepared to comment on policy I will say that we have Mb.
Embrace regulation, we've already taken a few calls and.
We're again very excited about this space, we're very excited about our acquisition of victory in scarp Your terror and Sam Ratner joining our team.
And so we've been very focused on on figuring out what are the areas in which we want to focus and what I can say is what I've found to be really compelling is the number of crossover synergies that I didn't even realize particularly around incentives, which is an area that we're going to be very focused on.
You know right now our goal is to potentially get to between one and three markets before the end of this year, but based on what we're seeing and sort of the interest levels from some of the potential partners.
And some of the commentary that we've received for regulators, we feel really good about the space.
Thank you.
Thank you Jason next question comes from Dan Salmon of BMO. Dan go ahead. Please.
Good evening everyone.
Maybe just follow up on the questions about the improvement insurance just more directly ask.
What would you count as your top two or three contributors to the improvement insurer and everything.
And up to focusing on higher value customers.
Where were you seeing there levers really helped drive that.
Improvement and then just the second.
On the advertising side my question is.
Do you expect to launch a self serve AD platform in 2021 and.
Where does that stand on your list of product Roadmaps for the advertising business. Thanks Yep. Thank you Dan those are some very good questions.
On engagement you know I have to say the team has done a phenomenal job in Q4 really attracting subscribers that are high value that are very sticky you know when we look across our engagement metrics, we see increased viewership.
127 hours, we also see an increased number of daily active users.
We've seen an increase in the number of programs people are watching on average in 2020, we've gone to 154 programs for customers. So we feel very good about the types of customers. We're attracting we feel good about the bundles that we're selling which you know are have much higher attachment rates attachment rates.
You know have increased by three acts.
<unk> from the prior year. So that is obviously, adding to strong engagement numbers and what's interesting is when we look at our 12 month retention cohort, we see a very solid lift there.
And that's why we're starting to get really comfortable with our position in the marketplace.
And to your second question.
If you could just repeat that we didnt hear that well.
Self serve self serve advertising, where does that stand on the roadmap. Yeah look I think that first of all our advertising revenue is quite strong even relative to where we were just six months ago.
And the three things that the three levers that move our at our <unk> per customer is really fill rate number one number two is the number of hours that people are watching which is increasing and then the CPM and so when you think about the fact that we've able we're able to get to $8 and roughly 50 cents per customer.
We feel that we're not really in a position to focus on a self serve platform I think once we start to exceed 10, 11 or $12. It probably makes more sense to focus resources in an area, where we can maximize our advertising revenue.
So we're not there yet, but that's a good thing of course, because we've got a lot more monetization ahead.
Thank you.
Thank you next question comes from Darren <unk>.
<unk> capital.
I do too small and congrats on the quarter two questions if I may.
You added a fair amount of gross subs in the second half of the year I'm just kind of curious two months in how retention of that is looking from that cohort and then David on prior calls you guys had talked about use of AI and being thematic in 2021 on kind of curious your planned and using AI in conjunction with all of those.
Net of data you have on your sub base improved results.
Why don't I start from the I think the second question was on AI.
Look we're very excited about data in general as you know, we collect about 22 billion data points per month, and we've really invested into our B I team and machine learning and as you can see from the engagement hours that continue to increase we do a good job surfacing content.
For our users at the right content at the right time, and so you know the interesting thing about that is we think we can leverage that data for wagering as well. So we think that there's a lot of areas in which were our video team can support the wagering group and really driving a lot of engagement. So we're going to be very focused on machine learning in 2000.
'twenty one again, we're very happy where we are today and just some early data points.
In January.
The quarter at least in January is looking pretty solid.
You know again, we had a nice sports quarter with college football.
And then most recently we had the Super Bowl.
And so the numbers are there looking strong and we think we have enough audience to really build some really solid algorithms to really surface. The right content and then over the long haul surface the right potential betting opportunities as well. So we're thinking about this actually holistically and we're very excited about it.
To the first part of your question on or have somebody you want to answer yes on the second half of the year for us that on as you know is there is where we get the majority of the staff growth. We added two on a 62000 net adds in our in our Q3 and Q4 last year as well consistently reinvested in marketing to drive this growth and we actually see notoriety from the behavior of these new.
<unk> additions that you know, they're actually quite engaged and they're showing very promising and interesting.
On the engagement to their to the platform. So quite pleased with that one again clearly that first half of the year is more of a consolidation phase and as I mentioned before we're going to work on solutions that kind of improved debt situation as well.
Great. Thank you.
Thank you Dan Our next question comes from David Beckel affair and Barry.
Welcome David.
Hey, Thanks, a lot for the questions appreciate it.
They are doing well.
Two sort of questions on the on on the spending side I appreciate the revenue guidance of course.
But particularly as it relates to 'twenty 'twenty. One I think you mentioned, you're you plan on expanding the breadth of the sports offering.
That correctly does that imply.
The addition of specific types of sports content that you don't currently have and it's so.
I assume that you expect you plan to expand the topline enough to continue to grow contribution margin and then second.
Secondarily I was hoping you could expand a little bit on.
How quickly and in what direction you plan on spending the 400 million plus that you just raised and any sort of framework or guidelines you can provide on a rough sort of EBITDA number would be really helpful.
So why don't I take the first part of the question around content look our job is to continue to optimize our packaging. So when we say expand the breadth of sports as you recall in 2020, we decided to work with Disney.
And allowed our Turner deal to expire. So you should think of it is that we're going to be very measured and very disciplined as we have been throughout.
Throughout the year and that goes for everything that we do here.
Here at <unk>, but we will be looking for opportunities for us to expand the breadth of content that our current subscribers really enjoy.
Another cycle on that point I mean on a on a margin basis, David as you know we don't provide guidance on specific metrics at this stage, but you know as you've seen in Q4, our subscription related expenses that is including our content cost and mainly on a present our content cost was 86% of the total revenue showing the banner.
It's all of the strategy of growing advertising, expanding advertising upselling and expanding our business that way.
In reality that 86% is kind of 90% once cleaned out from some unusual items now.
Now clearly that is moving on that either action is not going to be something that is gonna be debt every quarter consistently but on a longer term.
A disciplined approach on growing advertising monetization in controlling and optimizing the content offering will help us is going to continue to deliver improvement over the long term on our margin.
In terms of the adjusted EBITDA, we don't get yet of debt lab on in terms of our guidance wasn't even more when we get close to the each of the quarters.
Great. Thank you. Thank you David Thank you David.
Thank you David.
Next question comes from Jim Goss of Barrington.
See you.
So a quick question.
First.
In terms of sports wagering.
And what I was wondering if you need you feel you need any more acquisitions or do you feel like the current platform and people to provide you with the capabilities.
Growing or gameplay.
Now that you have those in place and it can grow with those and secondly.
Cvs share that.
A meeting the other night as I'm sure you're aware and they talked a lot about.
Yeah.
Pluto TV or Eva service and also.
The.
Incorporation of more live sports in terms of what they plan to be providing.
Providing in there for 499, and then any non packages and I'm wondering if you view those as a competitive alternatives and threats that are you.
Do you feel free to look at as well.
Thank you Jim these are both very important questions.
And on.
On question number one we're very excited about our two acquisitions Baotou sports and victory in fact, the more time that we spend with them. The more excited we are about the talented two groups that we brought together and we've just closed as we mentioned in our shareholder letter on our.
<unk> victory you know next week they'll already be in New York, and we're already meeting with the different teams.
You know at Bubo, so with respect to potential opportunities look.
We're disciplined but we're also aggressive.
And.
We were able to pick up two companies that we think are great and you can tell by how quickly we're moving with deals with the with major League baseball and NBA in Iowa, and also getting in front of regulators. So very happy about that however, we are always in market looking for potential acquisitions that we think we will.
Significantly improve our ability to deliver value to our customers and so we'll continue to do that.
As it relates to your second question around.
Around Viacom CBS.
There's a lot of players with lots of great offers out there. In fact this is a wonderful time to be a consumer in America.
Amazing content from dozens and dozens of amazing media companies and new players like the apples of the world.
I don't believe that these companies are a threat to us at all bubo TV very specifically is a sports first cable TV replacement service. It does not compete with for dollar services. It does not compete with 10 dollar services and if you're a Cvs customer and you really loves CBS and you don't watch.
Anything else I would actually urge you to go pick up your CBS Paramount plus subscription because it is phenomenal content.
But if youre looking for a more robust package that includes all the sports that you won with great content from other media companies. Then you know you're probably going to be in the market for a product like ours. Lastly, I would say that there are still 75 million Americans that have.
A N V P D service and I'm sure you saw the latest parks Associates report I think that came out in January were based on their findings 43% of cable TV households are likely to switch to a virtual mvpds streaming product. So the market is is <unk>.
Large we think that we're going to be very successful.
In this market, particularly as we combine some of these other capabilities that we've talked about today.
But that's it really.
Okay.
Thank you. Thank you. Thank you James.
Thank you very much Jim.
Question.
Now conclude the earnings call.
Very much for tuning in.
Good day.
On a profit.