Q2 2022 Fubotv Inc Earnings Call
Good day and welcome to the football Tv's second quarter 2022 earnings call. Today's call is being recorded all lines have been placed on mute to prevent any background noise and after the Speakers' remarks, there will be a question and answer session.
I would now like to turn the conference over to Alison Sternberg Senior Vice President of Investor Relations. Please go ahead.
Thank you for joining us to discuss about Tvs second quarter 2022.
With me today is David Gambler, co founder and CEO CFO and John do you need a CFO for about.
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 Doctor about 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 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, including quarterly and annual guidance and cash flow and adjusted EBITDA target.
Opportunity expectations regarding growth and profitability subscription level, the Molotov acquisition expected synergies of the technology platforms and related savings business strategy and plans and the continued shift in consumer behavior and our strategic plans regarding through both sports book. These.
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 June 32022 to be filed with the Securities and Exchange Commission and other periodic filings.
With the SEC.
These statements reflect our current expectations based on our beliefs assumptions and information currently available to us.
Though 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 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 of these non-GAAP measures to the most directly comparable GAAP measures are also available in our Q2 2022 earnings shareholder letter, which is available on our website at IR dot.
Dot TV.
With that I will turn the call over to David.
Thank you Alison and good afternoon, everyone. We appreciate you joining us on the call today.
The economic environment has fundamentally changed since our first quarter earnings call. While there is ongoing uncertainty. We do believe these challenges will accelerate cord cutting as consumers seek affordable sports and entertainment streaming alternatives.
But we also realize the cost of capital is increasing and that the market's appetite for profitable growth is clear.
While we believe through those model will prove to be both resilient and profitable. We also know we must continue to refine and adjust our business to reflect this changing economic environment.
Therefore, we remain focused on reducing internal costs and continued to review our entire cost structure to identify additional areas of savings.
In parallel we will continue to work to drive measured growth by improving content related unit economics and materially growing our high margin advertising revenue.
We continue to believe that an integrated wagering platform offering both live video and the sports book will result in the best viewing and gaming experience for consumers.
However, we decided to enter the wagering business in early 2021 at a time when the business climate and efficient cost of capital provided the runway to develop new business lines with longer profitability time horizons.
Now with the recession and inflation hitting 40 year highs that no longer holds true.
We recognize that the market has changed and therefore, we have made the decision to place Bubo gaming our online sports wagering business under strategic review.
We will no longer pursue this opportunity on our own and are exploring the best path forward to scale the business we.
We look forward to continuing to update you as conversations progress.
Now, let's turn to our second quarter results against this challenging environment and continued focus on reducing our cash burn I am pleased to report that we closed the quarter with strong year over year subscriber and revenue growth.
Global revenue for the second quarter increased by 69% to $221 8 million, including a 65% increase in North America to $216 $1 million. This topline growth was driven by a 41% increase in our North American paid subscribers 946.
735 it.
It is important to note that despite the year over year growth in subscribers. Our end of period subscriber accounts came under pressure in North America, primarily due to underperformance of certain sports content during the seasonally low growth part of the year.
We believe that we will finish the third quarter with a record number of subscribers and we are now entering the busiest period on the sports calendar.
AD revenue in North America grew 32% year over year to $21 $7 million. We are disappointed to report lower at <unk> as we expect it to have AD tech upgrades in place for the second quarter.
We continue to deploy updated technology and introduce new AD serving systems designed to more effectively monetize our inventory and improve scalability.
As a result, we believe we should be able to deliver addressable advertising capabilities at scale by year end.
Notably both subscriber acquisition costs and average revenue per user ratio came in within our target of one to one five times and we saw improvement in adjusted contribution margin operating cash flow and adjusted EBITDA compared to the first quarter. This is a trend we expect to continue as we anticipated.
Turn to growth in the back half of the year.
This also provides us with added confidence in our ability to achieve our goal of positive cash flow and adjusted EBITDA in 2025.
Turning to our rest of world screening business, which includes France, and Spain. We ended the quarter ahead of expectations with approximately 347000 total paid subscribers and $5 8 million in total revenue.
As it relates to operational gains we implemented programs to increase take rates of higher RPC products, among new subscribers and migrate lower ARPA of subscribers to higher price bundles.
This has started to yield meaningful subscription ARPA and contribution margin expansion we.
We believe this growth will continue in the quarters to come.
I'm also pleased with our liquidity position, which includes approximately $379 million in cash at quarter end, allowing us the financial flexibility and Optionality to fund measured and disciplined growth initiatives, while remaining highly focused in the management of our capital.
In support of expanding unit economics, we continue to balance the aggregation of the best sports and entertainment content with vigilance around costs as part of that strategy. We grew our offering a free AD supported TV channels for Vas channels to 40 to help drive long term at <unk>.
Should we expect to increase our fast channel operates in 100 networks by the end of the year.
We believe the future of television will be interactive our differentiated offering is designed to provide our consumers with the greatest best premium content through a custom and personalized viewing experience optimized for sports viewership.
Through proprietary interactive experiences, including our recently launched picking games and our <unk> Sports book. Our goal is to turn passive viewers into active participants that are engaged through multiple through boat products.
We will continue to develop our interactive capabilities and believe this will over time expand ARPA and drive engagement and retention as users experience the breadth and depth of the platform.
I'm also pleased with the progress we are making in rolling out <unk> Sports book, We recently completed our submission to the New Jersey Division of gaming enforcement and expect to be approved in time for the 2022 football season.
New Jersey is the second largest U S market and mobile sports betting in terms of handle and our presence there will mark an important milestone on our wagering roadmap.
We also expect to launch it in additional market and the ensuing weeks doubling who both sports books availability to four states.
Our integration of Molotov, France's leading live TV streaming service acquired by <unk> late last year continues to progress.
We believe that leveraging the many technology synergies between coupon Molotov will enable us to create one robust global platform that will aid faster product development and a higher quality user experience.
This platform is also designed to allow us to leverage our global technical talent pool and enable us to launch the <unk> TV product and additional international markets with minimal incremental costs.
As consumers become increasingly selective and frustrated with the many streaming services in the market they are putting more value than ever before in a single solution that allows them to cut through the onslaught of programming.
We believe our value proposition of offering diversified content mix aggregated and presented through a customized interactive streaming experience continues to resonate with consumers as we capture added mind and market share.
In closing we remain confident that we will demonstrate as we have begun to do this quarter the inherent leverage in the <unk> model and our ability to achieve our positive free cash flow target. In 2025, we are extremely optimistic about the future of the aggregated streaming model and our mission to build the world's leading global live.
TV streaming platform with the greatest breadth of premium content and interactivity.
Thank you everyone for joining us on the call today. We appreciate your interest and continued support we look forward to outlining our strategic plan and key initiatives and long term financial targets at our first Investor Day on August 16, I will now turn it over the call to John <unk> CFO John .
Thank you David and good afternoon, everyone, we delivered double digit year over year growth in North America across several of our Kpis prescribers total revenue and AD revenue, notably our streaming business and the rest of world came in consistent with expectations on revenue and ahead of expectations on subscribers.
Sports is a seasonal business, we again expect to see sequential growth in the second half of 2022 as the live sports calendar enters its busiest period with the English Premier League and college football seasons kicking off later this month.
Starting at the top second quarter revenue was $222 million. This includes North America streaming, where we delivered revenue of $216 million slightly below guidance due to a shortfall in subscribers north.
In North America subscription revenue was approximately $194 million, an increase of seven 8% year over year.
This was primarily driven by paid subscriber growth of 41% as well as prescription <unk> expansion up 2%.
Our rest of world streaming segment generated $5 8 million of revenue in the quarter on a base of 347000 subscribers adverts.
Advertising revenue increased 34% year over year to $22 million and accounted for nine 9% of total revenue.
<unk> decreased approximately 18% year over year to $7 25.
On a sequential basis <unk> increased five 5% over first quarter of 2022 levels.
We expect this metric to improve as the year progresses, which we believe will position us to expand contribution margin overtime.
Our second quarter adjusted EBITDA loss came in at $79 1 million compared to a loss of $47 million in the prior year.
This also represents a sequential reduction from a loss of $105 million in the first quarter of 2022.
We had our second quarter 2022 earnings per share loss of <unk> 63.
Adjusted EPS in the second quarter of 2022 was a loss of <unk> 45.
And adjusted EPS excludes the noncash impact of goodwill impairment stock based compensation, the re measurement of warrant liabilities and the amortization of intangibles debt discount and other noncash items.
Now turning to cash flow operating cash flow in the quarter was negative $91 3 million inclusive of $7 7 million associated with the wagering business.
This represents a $35 3 million reduction compared to the first quarter and our expectation is that operating cash flow losses will moderate further over the rest of the year.
Turning to the balance sheet, we ended the quarter with $379 million in cash and short term investments.
We remain highly disciplined in the management of our capital structure to afford <unk> TV, the financial flexibility and Optionality to fund measured and disciplined growth initiatives.
Moving on to our outlook, we believe 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 in North America and rest of World note that this guidance does not include any projected revenue from online sports wagering.
First we will discuss North America streaming.
For the third quarter of 2022, we expect to generate revenue of 200 to 205 billion, representing 29% year over year growth at the midpoint and subscribers of 11352115 5 million, representing 22% year over year growth at the midpoint.
On a full year basis, we expect to generate $910 million to $930 million, representing 45% year over year growth at the midpoint with subscribers of one three.
Three three to 135 billion, representing 19% year over year growth at the midpoint.
The revision of our previous full year guidance takes into account the impact of our subscribers shortfall in the second quarter and additional conservatism, but our outlook based on the changing macro environment. While the revenue guidance also reflects the pace of subscriber growth expected within the third quarter and throughout the remainder of the year.
For rest of world streaming, we expect to generate third quarter revenue of $5 million to $6 million with ascribe. It to 340 to 360000, and then a full year basis, we expect to generate revenue of $20 million to $25 million with subscribers of 340 to 360000.
We will continue to carefully monitor the global macro environment 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.
And we remain confident about our long term growth prospects for our businesses and our ability to deliver on our profitability goals.
Thank you David Thank you John .
We're now going to turn to the Q&A portion of our call.
Thank you today's question and answer session will be conducted electronically. If you would like to ask a question on the phone lines. Today. Please press star one on your telephone keypad. Please limit yourself to one question and one follow up question to allow everyone a chance to signal once again, everyone that is star one on the telephone.
Okay.
We will take our first question from Clarke Lemon.
With BTG.
Thanks, a lot good evening I've got two I'll, just ask them upfront quickly David or John maybe you could elaborate a little bit on the operating backdrop, and what you're seeing that sort of driving that.
Guidance reduction for the year Theres been some discussion I think recently a slowing top of funnel growth churn pressure on CTV is that what you are seeing right now in <unk> and if so maybe could you talk about the second derivative of it.
And John on Finance, you guys talked about sort of reducing cash burn.
Maybe I missed it but I don't think you gave an update on sort of.
Where things stand right now with the ATM, but also with the ballpark $400 million of cash you have on the balance sheet right now how do you guys feel about.
Sort of runway is there an updated otter auditor opinion that you might share anything that you could talk about on that front would be helpful. Thanks a lot.
Yeah, Hey, Mark this is John I'll start off it sounds more like too long its not two short ones, though.
So look I think on the second question I'll start with that and then David Niall private drove back and forth on the first one.
In terms of the cash and the ATM I think it's a fair question to be asking and like as I mentioned in the prepared remarks, we finished the quarter with $379 million in cash and we expect the burn to improve sequentially in both <unk> and <unk>.
And then I would also say a couple of things to give you I guess I call. It some more context on how we think about the ATM and capital needs.
On the first side of that I would say as a reminder, given the early signs of the macro uncertainty to start the year, we raised about 220 million using the ATM in the first quarter and as a reminder, the average price that it was at about $7 50.
With the weakness in the stock over the past few months, we have not tapped that ATM for additional capital and where have we needed to of course.
The second point I would say as David's comments as you heard we're looking at strategic alternatives for our gaming business and that will also serve to effectively raise capital by reducing our cash burn. So I would expect that would organically extend our runway as well and then further bolster cash so when I think the ATM as a <unk>.
Tool and it allows us to be opportunistic it gives us optionality in a volatile market. As we are seeing currently we also think that our existing cash position gives us flexibility to not raise capital at current levels.
Let me start with a couple of comments.
On your first question one is.
On churn, it's really interesting right because I think typically.
The way a lot of people think about churn and macro is as macro softens churn goes up right and candidly you didn't ask this but I would tell you that in Q2, we saw a slight uptick in churn versus <unk> of last year, but that was we think really more driven by the timing of the sports calendar in June this year versus last year was a tough comp when we look at the third.
Quarter currently in July we saw churn actually down year over year versus July of last year, and I think we feel pretty good about how August starting although it's early so hard to say if there's anything that's obvious in terms of affecting our business at this point, but not really seeing it there in terms of the switch.
Sorry, John I, just wanted to chime in a little bit here Scott This is David.
I don't know how long you've been following <unk>, but if you think about 2020 pre COVID-19, which you are probably seeing is a very similar seasonal cadence if I'm not mistaken and I don't have the numbers in front of me I think we were down about 9% in the first quarter of 2020 versus the fourth quarter.
Of 2019, and then we saw.
We were relatively flat in Q2 of 'twenty, probably down about 1% or 2%. So what youre seeing is a return to the pre COVID-19 seasonality I don't.
I agree with John I don't see this as any.
Is there any risk in terms of economic risks in fact, I would argue that the worst the economy gets.
There's less discretionary income available I think people will actually start to really consider moving from.
Traditional TV to streaming, particularly given the fact that you have.
A very strong sports calendar highlighted by the NFL.
Starting in the ensuing months so.
Again, we're very bullish on the overall macro you have about 65% to 68 million subscribers still in the traditional ecosystem and then on top of that you have consumer stacking plus services, which are becoming.
Somewhat burdensome and costly so I think we're actually in a good spot and as John said, we will return to record growth.
At least that's what we're forecasting in the third quarter relative to where we ended 2021.
And maybe I'd add one last thing to that which would just be when you look at our.
Our assumptions in terms of the guidance.
The third quarter assume is call it organic 29% year over year growth on revenue.
And it assumes subscriber growth of 22%. So I'd say, it's still very healthy growth and then if you go into the fourth quarter call at the full year, you could back into the fourth quarter, but essentially we're looking at 45% year over year growth.
On North American streaming revenue and then call it around 20% ish growth at the midpoint on concepts.
Really helpful. Thanks.
We will take our next question from Laura Martin with Needham.
Hey, there.
Stock up 18% after hours for lastly, John .
Talk about the gaming business, but David at the beginning of the wave.
At the beginning it's always said youre going to look at strategic alternatives. But then later on you said Youre really excited about getting new Jersey, a year from now so can you actually dovetail those two like two comments there.
Yes sure. So on the latter question around New Jersey, it's actually imminent. So we've already submitted to the DJ in New Jersey, and we're hoping to hear back from them in the next few weeks. So we will be live in New Jersey, roughly around the beginning of the football season then.
The reason I'm still bullish on the intersection of video and gaming is that integrated experiences build defensibility and it's something that is a cornerstone of what we're doing given the fact that we're a sports platform with respect to the first part of your question.
I think it's become apparent that we cannot go it alone.
Given the costs associated.
With.
Driving that business to cash flow breakeven and then just I just want to remind everyone that the assumptions that we were under when we made this call.
Cost of capital was pretty much free and so the time horizon to develop that business was significantly longer than investors have an appetite to wait for today. So again, we're still very bullish on gaming, we will launch New Jersey imminently.
Hopefully we will get an approval in the next few weeks.
But we will look for opportunities to partner with other companies and given how much we've already built out with the <unk> games and some of the other features.
It could be quite compelling. We also have if I'm not mistaken 10 or 11 market access license deals.
In place. So we have some value to offer a partner who is looking to.
Quickly get into the business.
And at the same time not have to worry about spending a lot of money marketing to consumers given the number of customers, we have as well as the number of trials that are coming in.
On a regular basis and Laura I would just add Super high level Big picture takeaway I think it should also be that we're really hyper focused on our path to profitability and reducing our cash burn and we're optimizing our assets.
Okay. My second question My second and last question is on advertising, so David I actually really don't mind, each add numbers because you actually if you tell the CPM.
Would have been up 50%, which will be the strongest connected TV growth announced to date anyway and earnings.
Can you talk about like what happened with pricing and why its cyclical or why you can fix it by year end because these are actually really robust impression growth numbers you reported.
So look I think there's sort of this.
There's two things here that I think are important one is that there is a macro.
And we're not we see some softness but certainly not to the extent that I've heard.
Across the tape today, we're very focused and we have been as you know on high quality subscribers. Our audience. If you think about the most valuable audience today and TV, It's Mel 18 to 49, and we fall in the $40 to 42 range, which is also I would say the youngest.
In terms of just even the virtual mvpds. So we have a very upscale audience tech savvy they are paying.
$70 plus.
For our service, which means that for a similar.
I would say a CPM basis for a free service our free AD supported service people are not spending on premium products on those platforms that are that are free. So we have a very upscale consumer we're very confident in what I, what I am disappointed about though is.
Is that we spent more time than I had anticipated trying to understand some of the architecture that would require that would allow us to actually optimize monetization over the next 12 to 18 months. So.
If I look at some of the scale ability items that we were not able to deliver against this quarter, which I felt we would have had by.
By now in advance of football season.
There is a pretty significant room for growth. So on the one hand I am very bullish of course, there is that uncertainty, but I can't say that we have felt any of that to date and all of this right now is in our control which makes me.
Very excited about the next couple of quarters, yes.
Yes, Laura I don't know if you keep it Greg.
Just for context, when you think about our 32% growth clearly that means most of it all of our categories actually posted growth, but from a categorical perspective, I'd say telecom in insurance, where let's say the two strongest categories and then relatively speaking streaming services tech and CPG around the lower end.
Okay. Thank you very much.
Okay.
Okay.
Okay.
We'll take our next question from <unk> with Evercore ISI.
Okay. Thank you very much I guess my question is.
Yes.
A follow up to the prior question could you talk a little bit about our food trends and then is your thought in terms of back to your long term target still does it still hold or has that changed but really in the quarter and.
Quarter to date, what have you seen and what is driving it. Thank you.
Okay.
I'll start this is David.
Look we're still holding our long term targets, which is 15% to $20 again, we're not.
Monetizing our viewership and our audience to a degree where we think Theres limited growth I think that if we were able to implement some of the tech improvements.
That we're looking at around AD.
AD part optimization AD decisioning and a few other areas around address ability, we could've easily accomplished a 50, 60% improvement relative to the number you see today, so I'm very comfortable with the 15% to 20 and just to give you some context for that number if you look at just the old school.
Traditional cable TV.
If you look at just sort of them the major players in that space Youll see that their average at our foods are still anywhere between call. It nine and $12. So if you layer on top of that address ability and.
Reed Hastings comments recently on $80 Cps, we feel very comfortable that given our sports programming.
And our I would say high quality subscriber base targeting males 18 to 49, I think puts us in a really good position to be able to achieve.
Those levels.
What I would just add to that in terms of the trends from a call it dollar or percentage specific basis.
If you look at the second quarter, let me give you the transfer of <unk>. We were at about $6 87 in terms of <unk> <unk> was $7 25.
The seasonality component will kick in right and so <unk> and <unk> were both.
So an improvement on an absolute basis, but also on a year over year growth basis, we should see improvement in so if <unk> was down 18% or so year over year <unk> improved from there and I'd like to think that by the time, we get to the fourth quarter, we should be positive and then just the last thing on that note is there is some a little bit of noise in that number just given the fact that we've had.
Had somewhat of a mix shift in terms of customers as you know.
Very recently launched Canada, and we're starting to see.
Some sub growth there and so obviously that takes down the <unk> for North America.
So still very healthy.
Okay. Thanks, David Thank you John .
Youre welcome.
We will take our next question from Darren <unk> with Roth Capital partners.
Hey, this is dillon on for Darren Thanks for taking my questions.
First if I could touch on the subscriber acquisition cost side.
Are you seeing any succession and some lower lower channels, maybe even some organic growth, that's helping drive down that sort of mix cost curve the news.
Subs and then as a follow up with with the content side of things.
I know you had some agreements that were up for renewal just sort of an update on.
How you see those coming in the future and if you can get any more leverage to sort of lower the cost to the subscribers.
Yes, okay. Good.
Good questions.
I think on the let me start with the content side, you might be referring to the Univision deal I think look we're in a situation where.
Just if you look at the guidance and where we are on the SRA line Youll see that were spending.
Close to $750 million plus per year on content and.
That's a pretty significant number if you are a media company in the United States facing a recession and inflation so.
We're obviously looking to continue to improve our leverage in that line and we're having discussions and I think one of the other things that we've done quite well is we're continuing to add fast channels to dilute the number of cable networks and our package to ensure that we're continuing to increase the amount of ad inventory.
Available. So I think overall and this is obviously an area of extreme importance to us, but so far we are happy with the deals that we've renewed.
And we think theres going to be some value and some of the additional value that we've received as part of these deals, but I'll, let John touch on <unk>.
Subscriber acquisition cost, yes, let me hit a couple of things are on the Sac, We don't put us in the number because it with distorted, but I'm actually pretty pleased as it relates to the percentage of subscribers that we get for zero SaaS right, meaning call. It word of mouth or reactivation that is not an insignificant number.
On a quarterly basis. So that's I think the good news and Thats continuing.
The second piece in terms of the backhaul it away from that but the team continues to push hard on that and we continue to look at more efficient marketing channels I don't want to get specific for obvious reasons, but I would tell them, who feel really good about the range. We've talked to in terms of I'll call. It one to one five times its monthly RPM and I'd like to think that we could trend more often.
No not at the lower end of that.
Thank you very much.
Yes.
We will take our next question from Jed Kelly with Oppenheimer.
Hey, great.
Hey, Thanks for taking my question first.
First question and then I have a follow up just circling back on the wager.
<unk> opportunity and the partnerships that youre thinking of potentially exploring.
Can you talk about how those talks are progressing.
Potential opportunity.
Great platforms.
Because I do think with your product.
It would drive good stickiness for a for a wagering platform concerned could you talk about how those partnerships are progressing.
Yeah, Hey, Jed this is David well I think the first thing is youll see some of those product treatments I believe.
On Investor Day, we plan to show you that some of those what you will find in our quote one.
I would say I don't want us to a prospective.
Partner candidate if you will that they said they have never seen anything like the types of integrations that we are doing or we were planning to do for Hugo gaming now to be clear, we will still do that for <unk> gaming in New Jersey, assuming we.
<unk> received the final go ahead from the DJ.
And so right now we're very early in those conversations, but I think the key message to investors is we're not planning to go out and actually launched 11 markets as we.
Given the market access deals we did.
So we are looking for partners, we will slow role until we find the right partner.
But we're having conversations I would say, we're pretty early on and we'll keep we'll keep you guys updated as information becomes available.
Got it and then I guess, just just a follow up to that I mean, what.
What are the potential partnership allow you to get like more sports sports content, where or what could potentially use global TV to bring the sports books interactive experience to a person's home and then my other question was given what we're seeing it with college football specially around the Big 10, the SEC media rights in sports.
We're also seeing the NBA contract is going to be pretty high as well. So can you talk about how you are kind of viewing future.
Future negotiations with some of your largest content providers. Thank you.
Thanks Jed.
I don't I start.
Look I'd say its a very complicated situation as you know you have a proliferation of streaming services, which are further fragmenting.
The market and so.
Again, I just mentioned the.
The number of services that consumers are stacking youre going to see a lot of leakage right youre not that youre going to see less AD revenue generated because people can't find games people will Miss games.
Youre going to see.
You were subscribers because people can only subscribe to so many things. So I think we're in a good position as you recall, 96% of our viewership is sports most people subscribed to <unk>, obviously, because they watch linear TV, but more importantly, it's because of the sports.
The product that we offer and the breadth of sports content that we have so.
I'm of the view that consumers will continue to.
To choose <unk> over other services and.
And at the same time.
We continue to have conversations with with different leagues on different capabilities.
I think it's important to stay in front of consumers and to offer them.
Grated features to really sort of allow them to lean in so I'm.
I'm not concerned as much on increased pricing in fact, I would say increased pricing on sports will probably.
Guarantee the fact that a lot of.
These media companies are going to have to maintain their.
Our relationship with us given how much we're already spending on content.
I'm actually quite bullish on our business overall, just given the fact that.
Streaming I would say media companies are migrating or shifting the paradigm to streaming but at the same time I think you know this very well theyre shifting from lower churn to higher churn services and from higher margin to lower margin services, so in an environment where.
Our content costs, particularly around sports continues to increase I think we're very well positioned to continue to help them.
Media companies optimize.
Monetization.
Thank you.
Our next question comes from Nick <unk> with Stephens.
Yes.
Okay.
Okay.
Yes, Hey, guys.
I'm curious could you talk about your exposure to political AD spend we saw a few broadcasters report recently and they've discussed some strength here.
Thus far in <unk> with more expected.
<unk> and <unk>. So just curious if this was impactful for you in the quarter and your thoughts going forward.
Yes. This is John I'll start with that one so for the.
The second quarter, we didn't get too much political affiliate still early I would tell you to start the third quarter. The money is trickling in and I think from an expectation perspective, I would tell you we're bullish on it.
All signs suggest that it's going to be big for us I would say it ends up being call. It.
A single digit percentage of the total, but probably somewhere in the mid to high singles for the back half of the year.
Great and then where are you guys in terms of forming direct relationships with advertisers and agencies as opposed to the programmatic sales route.
And with the relationships that you do have I'm, just curious if you're hearing any.
Any shifts or concerns for maybe AD spend in the back half of the year from these.
Again from any of those direct relationships specifically.
Sure why don't I take that so just just to.
Provides some final color on political I think it actually segways very well onto your question third and fourth quarter. You are looking at not only the NFL College football, but you also have the World Cup for the first time in the fourth quarter.
Which will put a significant amount of pressure.
On inventory of <unk>.
Which I think could potentially drive up political rates even further.
So and that in turn will also drive up just a regular I would say advertising spend for non political advertisers because there's just there's just not enough inventory.
As it relates to just the macro.
I think we are.
Very lucky to be a sports first platform. So we're going to see some strong tailwind I believe in the back half of the year around sports in general So I think as budgets get cut.
Folks will be cutting areas, where they feel they can create more value for themselves and sports is very difficult difficult to bypass, whereas fungible entertainment content, you could probably find it lower CPM level. So I think overall, we're still pretty bullish on third and fourth.
We haven't really seen anything that would suggest.
Some significant softness of course I did mention earlier, there is some softness but not enough to.
To make us.
Revise our advertising position.
I would just add actually to David's point.
I recently had talked to our folks on the political side and if you look at the floors that we're getting or asking for on the political side. There are far far above our average CPM today and so that also again makes it feel pretty bullish about what that can mean across the platform and then to David's point also on the NFL and sports.
I can tell you we have been approached by <unk> call it potential partners to get access to our sports inventory because it's so valuable.
That's helpful.
And last question here just.
General thoughts on implications of the apples the Amazons, maybe Netflix is acquiring sports content because.
When big Tech streaming services take these right it seems as though that content has been exclusively serve so.
Maybe you can just respond to that and maybe if you see an opportunity to work with these guys just general thoughts on what seems to be.
A trend here thanks.
Yes, I'll take that one.
Look this has been the I would say that the bear position on <unk> for seven years, maybe now 657 years.
A question about what about Amazon what about apples. So let me tell you something about Apple most recently they acquired the rights to major League soccer and if you read their press release very closely Youll note that not only does the company with over 1 billion devices.
Uh huh.
Issue a press release on the MLS, but what they said within that press release is that this content will be available on other platforms like vizio and LG et cetera that tells you that it's very difficult for even the largest companies in the world to maximize the value of any one piece of content.
We are very excited about the opportunity to work with some of these partners, obviously I can't say much more than that but we have had I would say early discussions.
With some of the folks that you've mentioned as far as what is the art of possible.
In terms of leveraging our audience leveraging.
Some of our other capabilities, but again, we believe the aggregated model is probably the most effective and most efficient model.
You will find in media one that has proven to be.
Extremely profitable for both media company and distributor and at the same time has certainly created a lot of value for the consumer and the last thing I'll just say on that note is that I don't think the television model was ever broken I don't remember anyone ever saying that hey, I don't like the TV experience.
What people have always been concerned about is the cost of the bundle and what we've been able to accomplish in streaming is really create.
A wonderful experience that continues to improve over time on the streaming side and with the stacking of services that consumers are currently experiencing we feel that the market is quickly evolving in our direction more so today than we thought a.
A year or two ago.
Great stuff. Thanks, guys I appreciate it thank you.
Okay.
And that does conclude todays presentation. Thank you for your participation and you may disconnect.
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