Q1 2022 Fubotv Inc Earnings Call
And John Geneva, as CFO of Blue belt.
Full details of our results and additional management commentary are available in our earnings release and letter to shareholders, which can be found on the Investor Relations section of our website at IR Dot Fu Bo Dot T V.
Before we begin let me quickly review the format of today's presentation.
David is going to start with some brief remarks on the quarter and food both strategy and John will cover the financials and guidance, then I'm going to turn the call over to the analysts to dig into Q&A.
Before we begin I'd 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.
<unk> financial performance, including quarterly and annual guidance and cash flow and adjusted EBITDA targets market opportunity acquisition strategy and ability to integrate those acquisitions expected synergies of the technology platforms business strategy and plans and the expected continued Roe.
A lot of Bubo sports books, and the continued shift in consumer behavior.
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 can be found in the risk factors section of our quarterly report on Form 10-Q for the quarterly period ended March 31, 2022 to be filed with the Securities and Exchange Commission.
And our other periodic filings with the SEC.
These statements reflect our current expectations based on our beliefs assumptions and information currently available to us.
Although we believe these expectations are reasonable we undertake no obligation to revise any statements to reflect changes that occur after this call.
During the call. We also refer to 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 of these non-GAAP measures to the most directly comparable GAAP measures are also available in our Q1 2022 earnings shareholder letter, which is available on our website at IR Dot Bubo Dot TV.
With that I will turn the call over to David Thank you Alison and good afternoon, everyone.
In the first quarter against the challenging macro environment.
<unk> North American streaming business continued to deliver solid double digit year over year growth.
Total revenue increased 98% to $237 million, including an 81% rise in advertising revenue to $23 million.
Our total paid subscribers also increased 81% year over year to 1.056 million.
We are also pleased with our reduction in churn for the 14th consecutive quarter, including an improvement of 49 basis points year over year in Q1 in acquisition efficiency with our <unk> ratio at the low end of our target range of 1% to one five times.
In rest of World streaming we were pleased to end the quarter ahead of expectations with approximately 305000 total paid subscribers and $5 5 million in total revenue.
This marks our first full quarter of being operational in France, following our acquisition of Molotov in December .
Our goal is to grow in a measured way with a primary focus on driving operating leverage and expanding margins.
Notably, we strengthened our balance sheet, ending the quarter with $456 million of cash.
The increased financial flexibility is expected to take us through 2023, and we are targeting positive cash flow and adjusted EBITDA in 2025 with a relatively modest cash requirement anticipated in 2024.
We have sharpened our focus on strategies to achieve profitability as we continue to scale.
And there are still $72 5 million households, who have yet to cut the cord and.
And we expect to continue to benefit from the shift from cable and satellite to Internet delivered TV bundles, we will primarily focus on five key areas.
Efficient growth.
Content cost as.
Advertising.
Tech costs, and our <unk> sports book to achieve our 2025% cash flow goal. We believe our focus on these initiatives strike an appropriate balance of building growth, while driving the operating leverage inherent in our model.
First a key lever in our path to profitability will be managing our marketing spend to acquire higher margin subscribers at the low end of our SaaS target.
Since the quarter ended we optimize the funnel to drive take rate of higher margin products from new users and migrated existing users in lower ARPA packages to higher <unk> bundles.
While we had anticipated a short term churn impact we did not experience any material changes to churn related to these price changes.
The churn we are seeing in Q2 is related to our seasonality of sports content.
And in fact this approach is already yielding meaningful ARPA expansion, which we expect to continue in the quarters to come.
Second.
We are laser focused on realigning our content costs as we continue to scale the business.
Leading the strategy for <unk> is Henry on our newly appointed Chief business Officer.
Leveraging his three decades of experience negotiating content deals with both traditional and digital platforms. Henry is tasked with driving content margin expansion.
Henry and his team are already executing our plan to increase number of free AD supported TV channels or fast networks on <unk>.
We believe this approach will enable us to significantly grow our AD inventory and increased AD revenue.
Fast channels also allow us to bring even more premium programming to our customers with minimal content costs.
Third our advertising business.
As mentioned earlier on the call, we achieved an 81% increase in AD revenue year over year.
Despite a less than robust AD market, particularly in categories like finance and technology <unk>.
<unk> also experienced challenges during the quarter, including delays in launching AD tech improvements and new capabilities for advertisers.
Moving forward. Our plan is to remain focused on strategic hires continued deployment of first party data and optimization of our AD serving platform to further enhance our targeting capabilities.
Additionally, we expect to expand the types of AD formats offered an inventory available across our video and sports book products.
We believe these efforts will lead to improvement as the year progresses, and we maintain our long term target for at <unk> at 15 to $20.
We have also rolled out a new recommendations driven homepage across all of our device platforms, giving a sophisticated tools to promote higher value advertising content in a personalized way for our subscribers.
These initiatives will position us to benefit from market trends that continue to favor <unk> value proposition to advertisers and grow contribution margin.
Building, our AD sales infrastructure remains a key strategic priority as advertising represents a vital lever for profitability.
Number four.
Leveraging many synergies we have across the company will also allow us to achieve cost savings the integration of Molotov and Edison AI, both of which we acquired in December continue to lay the foundation for growth and profitability for <unk> globally.
We believe the unification of our technology platforms across the global business will result in approximately $75 million in cost synergies between 2022 and 2025.
And finally, the <unk> sports book.
Wagering remains a key pillar of our strategy to integrate interactivity into our live TV streaming experience.
We believe our differentiated approach of bringing to market our proprietary food those sports book, which integrates live sports streaming in wagering into a single ecosystem will disrupt both video and gaming.
Mindful of the increasing cost of capital we've taken a measured approach to our rollout of our <unk> Sports book. However, we do not see this as a long term challenge or.
Our sports book as both a differentiated product feature within our streaming business as well as a standalone service.
Unlike other books in the market, we have the advantage of leaning in on our growing customer database to scale, therefore significantly decreasing our marketing cost to acquire players, which we expect will shorten our path to profitability.
In summary, our total revenue and subscriber results for the quarter were formidable, but we will continue to focus on the path to profitability.
We are highly confident in the value of bundling.
For media companies and consumers alike.
And we're even more comfortable that the plan we have put in place is achievable.
We are well on our way to building a sustainable business that reduces both capital and time required to achieve our positive cash flow goal in 2025, and we are excited to share more regarding our strategic plan, our key initiatives and long term financial targets at our Investor day in mid August where we will showcase our.
<unk> progress towards building, a sustainable live TV streaming business.
I would now like to turn the call over to John <unk>, Our CFO to review our financial performance John Thank you, David and good afternoon, everyone. Despite a challenging macro environment in the first quarter, we saw solid year over year growth in revenue and better than expected paid subscribers importantly, we ended the quarter with a strengthened balance sheet and a steadfast.
<unk> commitment to driving operating leverage and expanding margins as David alluded. We have continued to sharpen our focus on advancing towards profitability as we continue to scale and capture market share.
Turning to our results in the first quarter, we delivered revenue of $242 million. This includes North America streaming, where we delivered revenue of $237 million in line with our guidance.
Subscription revenue was $214 million, an increase of 100% year over year. This was primarily driven by paid subscriber growth of 81% as well as subscription <unk> expansion of 2%.
This was also our first full quarter with Molotov and our rest of world the streaming segments generating $5 5 million of revenue in the quarter on a base of 305000 subscribers with both metrics ahead of guidance.
Advertising revenue increased 81% year over year to $23 million and accounted for nine 6% of total revenue.
<unk> decreased approximately 5% year over year to $6 87.
And was a primary factor in adjusted contribution margin softness we remain confident that the initiatives David discussed earlier will lead to improvement as the year progresses and position us to expand contribution margin overtime and.
In the first quarter expenses as a percentage of revenue ticked up modestly largely driven by subscriber related expenses, which increased as a percentage of revenue due to contractual escalators and our content agreements as a result of this increase our first quarter adjusted EBITDA loss came in at $105 million.
As David mentioned, we have enacted a series of measures to expand subscription <unk> that we expect to meaningfully strengthen this metric over the coming quarters.
We had a first quarter 2022 earnings per share loss of <unk> 89.
Adjusted EPS in the first quarter of 2022 was a loss of <unk> 69.
And adjusted EPS excludes the noncash impact of stock based compensation, the re measurement of warrant liabilities and the amortization of intangibles and debt discount.
Now turning to cash flow operating cash flow in the quarter was negative $121 million inclusive of the impact of $2 6 million nonrecurring payments and $7 5 million associated with the wagering business.
Relative to <unk> 'twenty, two our expectation is that operating cash flow losses will moderate meaningfully over the rest of the year.
Now turning to the balance sheet, we ended the quarter with $456 million of cash cash equivalents and restricted cash. This includes $203 8 million of net proceeds from securities sales pursuant to our aftermarket program 2 million cash expense related to M&A activities and 11 <unk>.
$6 million cash investments or wagering activities.
We remain highly disciplined in the management of our capital structure to affords <unk>, the financial flexibility and Optionality to fund measured and disciplined growth initiatives.
Moving on to our outlook, we remain well positioned to execute on our long term revenue and margin goals, all while delivering a differentiated and world class experience to the consumer.
As a reminder, our guidance metrics are by region, specifically North America, and rest of World, which includes Spain and the recently acquired Molotov operations note that this guidance does not include any projected revenue from online sports wagering.
First we will discuss North America streaming for the second quarter of 2022, we expect to generate revenue of $220 million to $225 million with subscribers of 965000 to 975000.
This sequential subscriber decline is consistent with normal seasonal trends in our business and reflects the moderate churn impact of our recent price up on.
On a full year basis, we expect to generate revenue of $1 $20 million to $1 billion $30 million with subscribers of 146, five to $1 48 5 million as with our Q2 guide. This full year guidance revision reflects the churn impact of our recent price up and a less robust ad market.
For rest of world streaming, we expect to generate revenue of 5 million to $6 million with subscribers a 300000 to 310000.
On a full year basis, we expect to generate revenue of 20 million to $25 million with subscribers. A 300000 to 310000. This limited growth for the balance of the year reflects our focus on integration and synergy capture going forward. We will continue to apply a disciplined approach towards capital deployment and subscriber acquisition.
To drive both topline growth and improved bottom line results.
<unk> has come a long way in a short period of time and we remain confident that the actions we're taking to strengthen the business are positioning the company for near and long term success as we continue to transform the live TV streaming space before going to Q&A, David will end with some closing remarks. Thank you John .
I want to take this opportunity to express my gratitude and appreciation to the entire <unk> team across North America, Europe , and India for their ongoing commitment to our mission.
I also want to assure our shareholders that the entire company is focused on execution, and we are working harder faster and smarter than ever before.
Thank you everyone for joining us on the call today. We appreciate your interest and continued support and look forward to continuing to update you on our progress.
Thank you David Thank you John we're now going to turn to the Q&A portion of our call I would ask that just in the spirit of getting to everyone. Please restrict your questions to one.
And our first question comes from Laura Martin with Needham Laura It's good to see you. Please go ahead with your question.
Thank you very much I will stick to the erosion just ask one thank you.
Loved the advertising number and actually lumped in North America sub number much better than we thought so I'm going to go to gross margins David.
Was there a big step up we didn't have a gross margin below 5% all of last year and here, we have a negative 2% gross margin I think so it wasn't a big cost step up in some of your contracts. That's an annual step up maybe or do the acquisitions out a bunch of cost of subscriber related expenses could you talk about the gross margin pressure in that.
First quarter.
I wanted to start with David wants to come in from behind you can do that so there are a couple of things there one is really on the.
Content escalators and so those kicked in as you can imagine on Gen. One and so we didn't really have a corresponding price increase with an increase prices in 2021, and so the gross margins should improve going forward.
So much so in <unk> and then significantly in the back half of the year, both in <unk> and <unk>. So those predominantly.
The pieces to that.
Okay.
You very much.
But if I would just say.
Why are we just talking about content.
I think in the three months I've been here, we probably had about five or so renewals.
And I'd say that we've been very pleased with all five of those now as you know it takes time for those to kind of flow through given we have three year contract for the most part and so I would say on top of that as we move through let's say the next six to 12 months and beyond you'll also start to see those content costs start to improve as we become more relevant right. When those deals were done a couple of years ago. We were a fraction of a SaaS we are.
Today, and so as we've now call it kicked in above a $1 million million subs going 1 million four plus over the back half of the year I think those negotiations also favor us.
Thank you very much. Thank you Laura. Thank you. Our next question comes from Samuel Nielsen with Oppenheimer.
Thanks for taking my question I'm on for Joe Tonight.
Nice quarter first question is on Turner in the MBA showing MBA play out the March madness viewership, we've seen recently.
Do you feel like it's a piece of the puzzle that you'll need in the future to achieve your vision of kind of an all encompassing sports entertainment platform.
Well Sam Thanks for the question I think what we've demonstrated last year that we were able to continue to grow in.
In excess of the market without Turner.
Obviously, you always want to have more content rather than less content, but we don't believe that it is a requirement to have turn in order to continue to grow.
The way we have so.
Those conversations will continue and if the pricing is in line with our 2025 goal of hitting profitability then theres a chance that we can always bring turn it back.
Makes sense and then if I could follow up.
You mentioned, the launching wagering in Arizona, and Iowa, just wondering if there's any early learnings on subscriber retention or any type of increased viewership youre seeing from people that actually use the sports book.
Yes, So look I think when we came into this we had a thesis.
And I think what we've learned in the first two state launches is that people who are watching TV spend more time gambling place more bets and it's.
Spend more money and so what we've been doing most recently is managing our marketing effectiveness and our promotions and as we sort of get a better sense of how wed like to roll that out will continue.
To look to migrate our subscribers over to the book, but so far.
We're very happy about what we've seen and we're looking forward to doing more.
I guess my question is more the other way around are you seeing subscribers stay because of the additional capabilities that yes, yes. Good question right now we've been focused on subscribers to the book versus the other way round and the reason is we want to take advantage of.
The 1 million plus folks on the platform.
With that allows us to do is ensure we don't have a very significant marketing cost, bringing players in but right. Now we just don't have enough volume to be able to see if there is an uptick in engagement and viewership from folks that are playing.
Thank you very much thanks, Jeff Great. Thank you Samuel our next question comes from Dan Salmon with BMO.
Dan. Please go ahead.
Thanks, Alex and thanks, everybody.
I had a follow up just on advertising John you mentioned that a little bit of shortfall in <unk> and a couple of different reasons I think you picked up there.
A couple of categories that maybe you had mentioned that were short financials and technology, maybe some product rollout that was a little slower than expected.
In terms of that shortfall, maybe can you rank for us sort of what was the more important things relative to your expectations, what was the bigger shortfalls and visibility on correcting some of those things and bringing them back in line with your original expectations were.
Why don't I start and you can talk about this on the tech side, yes.
I'll give you some more color in terms of the quarter and how it played out and so I think like a lot of others you heard out there.
<unk> spent a lot of time in this space. So January was a really strong month for US and then February was a little bit softer in the March is a little bit softer, but still all in 81% from a category perspective of all things auto was our number one category.
And it was up.
Clearly above where the 81% came in and then we saw a lot of strength in the <unk>.
Consumer packaged goods category as well as the retail category and so little bit more flavor. There as we go into April just for context.
Not a lot of visibility I would tell you from April we're still seeing strength in auto sing.
Seeing a little bit of softness that we havent seen historically speaking in the CPG category.
From a resource perspective, I would tell you that.
Adding to our sales force and so call it since the end of the quarter or so.
We've added three sales resources, and we'll start to see the benefits of them coming in in the back half of the second quarter into the back half of the year. So let me stop there and then maybe David can add onto the other pieces of US, Yes, I would just say.
Dan that the key for US right now is the technology side.
We believe we'll be able to launch that header bidding solution, sometimes towards the end of the second quarter.
Some of those delays were really based off the fact that obviously hiring right now it's not an easy task.
And so.
Resource allocation internally to be able to develop.
That capability I think it's been a little bit slower than we had anticipated and obviously given the opportunity around heading header bidding.
We believe that that component could add 15% to 20% upside on both Phil and CPM. So it is important.
For us and hopefully we will have that up as I said towards the towards the end of the second quarter.
They're not alone.
During these days okay. Thank you guys. Thanks, Thanks, Dan.
Our next question comes from Darren <unk> with Roth.
Dan always good to see you. Please go ahead with your question.
Alison Hi, everybody. Thanks for taking the question I'm, just curious with the shift from the starter plan being removed.
The increase to pro I.
I know, it's early but what kind of customer sentiment, you're seeing kind of good better and different thanks.
Yeah. So derik good question look I think.
As John just mentioned in the previous question, we didn't roll up.
A price hike.
In 2021 so.
We've been manage that managing that very closely and while we've seen it pretty much is what we have.
We had anticipated was that the price up didn't really have such a major impact.
And it's more so the seasonality that played a bigger part both.
Both in the first quarter and in our guidance, but we anticipate a good portion of our subscribers to two to.
To be profitable from.
From a subscriber perspective, so it's something that we're very excited about comfortable with and the other thing. That's really important is the higher priced packages typically result in higher at our pool.
For those customers. So just looking at some of the more expensive packages they deliver double digit at ARPA. So we'll keep a very close eye on that as we go forward.
Let me just add to that because now what that price up I just wanted to make clear if it wasn't clear so I didn't hear the entire question before.
But that on an on an ACM basis now all of our subscribers are positive now on a margin basis.
Okay.
Darren Thank you for your question. Our next question is from the <unk> <unk> with Evercore Schweitzer.
Please please go ahead.
Okay.
Allison Thanks Alison.
My question is on operating cash flow. So you mentioned in your shareholder letter that the first quarter, our operating cash flow though.
Starting first quarter into second third and fourth.
Improving could you talk about.
The drivers there and perhaps frame the magnitude of improvement through the year for cash flow and then I guess a quick follow up is.
How do you how do you think about expansion through this year.
You mentioned, a couple of levers, including upsell could you help us think about the magnitude of that.
Yes, let me start with that let me start with maybe with the second question first right. So from an <unk> perspective, clearly the price that will be a big driver of that we're working on products. So there'll be more attachments to come there as well.
And then we assume that from <unk> perspective, we will see improvement as well as it go into the back half of the year. So those are the components of the expansion there in terms of the cash piece, let me kind of try to walk you through some of this you'll get I think a much more fulsome response, if you will at the Investor day, but the way I would think about it is that from a big picture.
Business perspective, right, we have greater cash needs in the first half versus second half just based on some timing of expenses right. So.
So Q1 would tend to be our largest or close to our largest cash quarter. The back half of the year tends to be much smaller.
So the way I would think about it is that you'll see a pretty meaningful.
Decline in terms of cash uses for the back half of this year. Then we will see an incrementally speaking bigger decline in 23 versus <unk> 22 in terms of cash usage.
The bridge to get to 25 were reset your EBITDA or cash flow positive.
There is a relatively modest.
Cash need in 'twenty, four, particularly relative to 'twenty. Two so hopefully that gives you some pieces to get to what you're trying to get to as it relates to your model or just cash in general.
Okay. Thank you.
Youre welcome.
Great. Thank you <unk>.
Our next question comes from Phil Cusick with J P. Morgan So it's good to see you.
Please go ahead with your question.
Thank you.
One question with two parts and a follow up.
That's a sneaky okay, yes.
Yeah.
Cash burn bigger in 'twenty three 'twenty two can you expand on why that is is that a.
Sort of gaming effort or ramping up in growth.
Let me start with NFL for a second is that let's take them one at a time.
I said that doesn't mean, that's what I meant to say was that 23 is less in 'twenty two.
And then 'twenty four is less than 23 just to clarify.
From a segment perspective.
There is a pretty significant improvement in North America swimming in 'twenty three relative to 'twenty two.
Okay that makes more sense, maybe I misunderstood so.
So the question is really you raised about $200 million in an ATM in the first quarter at a record low share prices and your AMG filing it looks like you continue to sell shares after the quarter closed I'm curious.
What you expect to continue to do in in an ATM to fund the business.
And if you look at other sources of cash was an ATM below $5 a share really the most attractive source.
And finally your converts are trading at about 50 cents on the dollar.
Would you consider doing anything or have you had incoming interest to do something about that take advantage of that discount.
Alright, I'll start with a couple of those things one is in terms of the convert.
I would assume that like what are what do we would or wouldn't be willing to do because you can I think respects. So I'll pass on that as it relates to the ATM.
We didn't do the ATM at $5, but there is something more like a $7.50 a share I think it was 752 actually.
So definitely more than wherever you are today in terms of the stock price and I guess, what I would say is that right.
There is a lot of uncertainty as you know.
And so between macro geopolitical.
Capital markets et cetera, we thought it was the most efficient way to raise capital.
Relative to do another things that could have been presented to us. So I would say that in terms of the go forward look as we said in the letter we've got seven plus quarters of cash and so where I sit I don't see a need to do anything for at least a couple of quarters in that longer so we'll see where it lands.
In terms of the ATM, we have call it north of a $100 million available. If we wanted to use that I would say is the plan would be to not access the ATM at $5 a share so hopefully that answers your questions.
Thanks, John .
Okay.
Thank you Phil Our next question comes from Jim Goss with Barrington, Jim It's always nice to see you.
Please. Please proceed with your question.
Jimmy on mute I think and Jim I think you might be on mute.
Alright, sorry, yes.
Sure.
But this.
Focus on making moves toward achieving profitability I think thats, a very positive thing.
I was going to ask going into the call about potential competition from <unk>.
Fast and connected TV and now it looks like you're embracing it as one of your partnership opportunities I was wondering how you plan to make that work would you be.
Sort of doing a split with the branded.
A party like Pluto, TV or creating your own how would that exactly work.
I have one follow up.
Yes, so thanks for the question Jim.
We have been adding fast channel. So this is not a there's two types of relationships theres one for our own network the <unk> Sports network.
That's a relationship that we would develop with.
SaaS platforms, like Pluto or <unk>, where I believe were available in 50 or 60 million homes right now.
Through Roku channel and others in terms of our own platform I think the key is we have a very engaged audience. So what we've been seeking out. Most recently is high quality SaaS channel programming that allows us to.
Dilute the viewership on the platform of channels, where we have less available ad inventory.
So.
That strategy has been working quite well in the early testing and we think were going to rollout 50 to 100 more channels on the platform and the key here is that people are spending.
Lots of time on the platform as you know live TV.
Still sort of the way most people watch TV and with the effort that we've put into discovery.
We feel that we can drive viewers to like programming, where we have more inventory and obviously that will lead to more AD revenue. The last thing I'll say is the fast channels are also a great way to lower content costs.
The typical deals are.
Zero fees with 50 50 Rev share.
So again, it's something that we think we can take advantage of over the long term.
Okay, and the other sort of related to <unk>.
Discuss the changes in the competitive space with.
Ever increasing numbers of streaming services.
Hello.
You are all competing for the same number of viewers and there are a lot of options that are growing well how is that affecting your strategy.
Look I mean, our strategy is intact I look at the world.
World that we're in which I'd like to call an infinite sum game, meaning that all media partners take advantage of.
Any one other partner, whether it's a distribution partner or like or.
Non sports network group that takes advantage of the Olympics on NBC, because <unk> carries that and pays out a variable rates, but all of these streaming services. These plus services are now heading into a zero sum game, where there will be losers and there will be winners.
And what we're proposing as an opportunity for everybody to make money. This is a bundled platform. We believe that consumers prefer bundles I think I mentioned in my shareholder letter that according to a recent Nielsen survey 64% of.
Surveyed or unhappy that they are not able to find the content that they're looking for which is very interesting because when.
We had started this business back in 2017 and 18 I remember there was a survey they came out with a 64% of people very unhappy with cable.
Because it was for whatever reason expensive the ads et cetera, but it looks like we're coming full circle and I believe that virtual mvpds will become the gateways to TV, it's an opportunity to create a very frictionless environment for consumers to move in and out of programming of different media companies also allows us to create a.
Very personalized.
Experience.
That really creates more value for the users. So I think over the long term, we've positioned ourselves the right way and we differentiate in three ways. One is on brand. We built a platform that's known for coming for the sports and staying for the entertainment number two we do have some content differentiation.
In the sports space and number three we continue to develop product features.
That are differentiated from general entertainment platforms like Youtube TV insulin so.
Across the board, we feel very good about our position and we're very confident we'll continue to grow yes, Jim if I could just add to that actually when you look at say our subs overall.
Grew 81% year over year in Q1, even with a step down sequentially in terms of the full year guidance, we're hovering around 30% growth in the marketplace at least obviously on the on the traditional side, which is declining and so we feel great about our market share gains you didn't ask this but I'll just throw it out there as well in terms of just what the path we need to get to that we think about profitability looking out.
25.
We'd call. It 3 million subs are left to get to profitability. So if you're thinking about longer term, David Thats, a number to think about.
Thanks that was going to be my other question I appreciate it.
Thank you so much Jim.
Just a gentle reminder to everyone. We respectfully ask that you limit your questions to one we really wanted to be able to get to everybody. Today. So thank you very much for.
Accommodating that our next question comes from Clark <unk> with BTG Clark good to see.
Please go ahead with your question.
Thanks, a lot.
I have question on extensions I know.
SaaS and FUBAR gaming are much bigger priorities at the moment, but David last quarter I think while you were talking about inflation, you've kind of mentioned off hand that paraphernalia, a big source of consumer spending, especially amongst avid sports fans, which is a key piece of your sub base. So.
Maybe this isn't part of the sort of short term roadmap, but I guess as we think about maybe out to 2025 since that's.
Part of the purview right now is that maybe a part of the roadmap or sort of long term strategy for you guys.
Look it's a good question I right now we're very focused on the areas that I discussed in my prepared remarks, I will say that the tech some of the technology that we've acquired around AI allows us to really understand what's happening on screen on screen. So I do believe that there is a a world where.
There'll be very targeted ads based on what youre seeing on screen and that technology right. Now is available we have several patents around that.
And we will continue to build it out but I think the key takeaway for me from what Youre, saying is that <unk>.
It was a very special company.
We have a very.
I would say focused position in the marketplace, 96% of our users watch sports, which means that we can continue to price up if necessary of content costs, particularly around sports continue to escalate and people are spending a lot of time on the platform we have a very captive.
Audience, which means we will have opportunities to really sell more and more goods as we get better.
At.
Putting the foundational technology in place so I'm extremely bullish people continue to watch TV and there are 72 million households that.
Still have cable and going into a recession.
I think it's really competitive compelling to have a competitive.
Lower priced alternative to.
Cable that still gives people a robust bundle at a relatively low cost John I think you mentioned the cost per hour to me earlier was quite low. So we think it's we think this is a good space to be in and we're very comfortable that we'll be able to really build a sustainable business over the next three years.
Great. Thank you Clarke, it's good to see.
<unk>.
Our next question comes from Zachary Silverberg with Bahrenburg.
In fact, please feel free to go ahead with your question.
Thanks, guys.
Talk about maybe the near term sports book outlook, maybe in light of the decision from the Illinois Gaming Board.
The potential for longer term revenue contribution from these sports books.
Yes.
That.
Look we have.
10 market access deals now.
Signed we have a pipeline of course.
Call it four to five more.
Can't really comment on the state's decision, but again, we received 10.
10 approvals before that Im not sure with a line of questioning was I'm not even sure that even reached out to us.
To provide any additional information, but I'm pretty sure. Our general counsel is probably talking to the state already about what has happened in terms of sorry, what was the second part of your question.
Just maybe any any sort of update on the potential longer term contribution from the sports group segment. If you can give any yeah look what I'll say right now is it.
Probably launch a couple more states before the end of the year number one long term the goal from an ARPA expansion perspective is probably.
Low to mid single digits.
From a dollar perspective.
And we will probably start to see some revenue coming in in 2023, I don't know if we have any additional color on that yes, I would just add that to your question. We will start seeing some revenue kick in color latest three Q4, Q and so you'll start seeing that line start to tick up a bit and then a more material revenue will start in 'twenty three just to add to that.
Quint.
Youre welcome.
Thank you Zack.
Our next question comes from Nick Sandler at Stephens <unk>. Thanks for joining the call feel free to go ahead with your question.
Hey, guys How's it going.
Thank you.
Joining the group here so.
With regard to stand.
Sports viewership.
Right.
The entertainment offering in which consumers actually might desire to have.
Yes.
Screen showing them stat.
Should we experience so.
This way.
It's an opportunity.
To provide unique Ed.
Yes.
These services simply can't.
You have effectively corporate sponsorship.
Types of advertising inventory.
Potentially at all times.
So I'm just curious on how you're thinking about leveraging.
Advertising asset.
If thats currently occurring.
Thanks.
Thank you for that question.
I mentioned in my prepared remarks that we're continuing to expand our portfolio of AD formats. So I think you're on track with leveraging value as a way for us to integrate product experiences and we're doing that with predictive games as well. So this is an area of focus for us because outside of the video inventory, we think there's ways for.
For us to really create brand value and as you know.
Sports fans.
Like to participate with brands during events you see that in stadium.
And in other places. So again this is an area of focus for US we're trying to build out the right product set to ensure that we're not.
<unk> sort of interfering with the viewing experience so that type of experimentation is going to continue with certainly on our radar.
Great. Thank you so much neck and.
This now concludes the Q&A portion of our call I want to thank everybody for your participation and we realized an incredibly busy earnings season and today in particular was very busy so.
We really appreciate your participation and your thoughtful questions and.
We look forward to speaking with everybody soon thanks very much again.
Thank you.