Q3 2022 Fubotv Inc Earnings Call
Hello, My name is Lisa and I will be your conference operator today at this time I would like to welcome everyone to the football TV Q3, 2022 earnings call.
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After the Speakers' remarks, there will be a question and answer session.
Like to ask a question during this time simply press star followed by the number one on your telephone keypad.
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I'd now like to turn the call over to MS. Alison Sternberg SVP Investor Relations.
Okay.
Thank you for joining us to discuss <unk> third quarter 2022.
With me today is David Gambler, co founder and CEO of <unk>, and John <unk> CFO of <unk>.
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 grew Bo Dot TV.
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.
Before we begin 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 long term target market opportunity acquisition strategy and ability to integrate this acquisition expected synergies of the technology platforms, and our business strategy and plans.
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.
Can be found in the risk factors section of our quarterly report on Form 10-Q for the quarterly period ended September 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.
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 Q3 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 Allison and good morning, everyone.
We appreciate you joining us today.
I am very pleased with the results for the third quarter, we delivered north American revenue of $219 million up 40% year over year.
Revenue in North America of $22 5 million up 21% year over year $1 million 231000 paid subscribers in North America, and 358000 in rest of world and we closed the quarter with $307 million of cash and cash equivalents reached.
<unk> cash and short term investments.
More importantly, I am pleased with the direction, we are headed in and the overall trends of our business as we make tough yet necessary strategic decisions to improve the overall business. We are confident the actions. We are taking in the path. We're on will yield value for our customers our shareholders and our employees.
Before moving on I wanted to discuss our recent decision to close our <unk> gaming business and cease operations of our owned and operated <unk> Sports book.
This was not an easy decision and it was made after much careful deliberation.
Ultimately we felt the decision was prudent in support of our profitability goals, allowing us to focus all of our resources on our core streaming business.
But as we continue to focus on data and interactivity to differentiate our virtual Mvpds, we still believe the integration of gaming and live sports streaming is powerful.
We remain open to the possibility of exploring ways to optimize our assets in the gaming space without investing our own capital.
The closure of our <unk> sports book, along with our sharp focus on the judicious deployment of capital and cash preservation provides us with added confidence in our current liquidity position.
We were pleased to see improvements in our adjusted EBITDA margin in the third quarter, which we expect will continue throughout the balance of the year.
Our initiatives drove outperformance in the quarter and position us well to achieve our goal of generating positive free cash flow in 2025 via sustained and profitable growth.
Our third quarter results provide us with added confidence in our ability to build a leading global live TV streaming platform differentiated by the greatest breadth of premium content and interactivity.
Our AD business delivered solid growth in Q3, as we announced at the beginning of the year. Our focus has been on investing in our advertising team our technology and our infrastructure.
To that end, we have made improvements to drive higher CPM and fill rate both important components in our strategy to drive AD revenue growth.
As we have stated in prior quarters media consumption trends continue to move in our favor with the acceleration of cord cutting at this point. It has been well reported that consumers are growing frustrated with the ongoing friction and fragmentation of streaming services and content with.
With the average U S households, now subscribing to almost five streaming services. It is clear consumers are having to stack streaming services in order to gain access to the content they want.
And with streamers, increasing their investment in original programming and passing those cost to consumers. The monthly subscription fees of all of these stack services in the aggregate are now approaching the cost of cable.
The ratings tell the same story consumers, who watch sports are not turning to plus and direct to consumer streaming services. According to Nielsen viewership for Thursday night football has been trending downward week by week in 2022 and has deteriorated year over year compared to those same gains were avail.
<unk> on linear television.
These are key dynamics that informed why we're more bullish than ever on our aggregation model a model that offers consumers a streaming platform with unique content, both live and on demand and that is presented to them through a personalized experience.
Technology is about effectiveness efficiency and experience and that's why we believe virtual mvpds are best suited to deliver consumer value and drive profitability for content owners.
Our winning value proposition to consumers was recently underscored by our number one ranking in customer satisfaction among live TV streaming providers by J D power for 2022.
<unk> scored number one by consumers and satisfaction for programming features and functionality customer care and billing and payment and did so against much larger and more established competitors.
This reinforces our belief in Google's competitive advantage, we offer a high quality product with innovative technology in effect, we are a premium platform.
Moreover, not only does our premium offering continue to drive an increasing number of consumers to our platform. We are keeping them engaged with this quarter, representing an all time low for subscriber churn.
It is important to note that <unk> collects over 2 billion data points across our subscriber base each month affording us the opportunity to continue to build impactful features develop algorithms and make informed content and packaging decisions.
Our strategy is to expand unit economics by aggregating the best sports and entertainment content, keeping customers engaged to drive advertising sales and upselling subscribers on additional content and features all with the vigilance around content costs.
I also wanted to take this opportunity to express how extremely proud and excited we are to partner with actor and serial entrepreneur Ryan Reynolds and his maximum effort productions, we will be working with Ryan and his team to create original content for the maximum effort channel and plan to partner with brands to minimize the incremental cost.
<unk> <unk> will manage all advertising sales for the channel, which we expect to launch in mid 2023.
As we shared previously we believe our internally built technology stack and forthcoming Nextgen global unified platform will position us to build on our number one customer satisfaction ranking and continue to innovate faster and more effectively than our competitors.
Our goal is to offer consumers a choice on how they want to engage with live TV.
Whether that be leaning back or leaning forward for consumers, who wished to lean forward, we offer multiple interactive products that have led to higher engagement.
Overtime, we believe interactivity will expand our growth and drive engagement and retention.
Looking ahead as John will detail, we are revising upward our north American guidance to include total full year 2022 revenue in the range of $949 million to $954 million.
In summary, our north American streaming business achieved double digit year over year growth across subscribers total revenue and AD revenue, while our rest of world streaming business performed well against revenue and subscriber expectations.
Alongside this top line growth, we are making progress towards our profitability targets I will now turn the call over to John <unk> CFO to discuss our financial results in greater detail John .
Thank you David and good morning, everyone.
Had a strong quarter across several of our key kpis.
<unk> total revenue and AD revenue.
Levering against our third quarter forecast.
Global revenue for the third quarter was $224 8 million, a 43% increase versus $156 7 million in Q3 of 2021.
Total revenue included $201 9 million and subscription revenue, a 46% increase versus $138 1 million in Q3 2021.
And $22 7 million and advertising revenue or a 22% increase year over year.
North American subscription revenue grew to $196 3 million, an increase of over 42% year over year, Despite a highly competitive and challenging operating environment, while rest of world subscription revenue grew to $5 6 million.
We also achieved a sequential improvement in operating cash flow and year over year improvement in adjusted EBITDA margin and expect these trends to continue throughout the balance of the year.
And rest of World framing, which includes Molotov we ended the quarter with nearly 360000 total paid subscribers.
Our focus is primarily on integration and realization of the approximately $75 million of cost synergies expected between 2022 and 2025. We are also pleased that rest of world subscriber growth revenue growth and cash flow has performed well against expectations.
Total operating expenses as a percentage of revenue increased by 97 basis points versus the prior year period, primarily due to a $35 5 million.
Noncash impairment charge associated with our gaming segment.
Our third quarter adjusted EBITDA loss came in at $92 7 million compared to a loss of $81 3 million in the third quarter of 2021, and adjusted EBITDA margin came in at minus 41% an improvement of 1062 basis points year over year.
Moving down the income statement net loss in the third quarter was $152 7 million, including the aforementioned noncash impairment charge of $35 5 million.
This led to a third quarter 2022 earnings per share loss of <unk> 82.
Okay.
Adjusted EPS in the third quarter of 2022 was a loss of <unk> 52.
Note that adjusted EPS excludes the impact of the noncash impairment charge stock based compensation and the amortization of intangibles amortization of debt discount and other noncash items.
We remain highly disciplined in the management of our capital structure to afford <unk> TV, the financial flexibility to fund measured and disciplined growth initiatives.
Operating cash flow in the quarter was negative $76 4 million, including $8 6 million operating cash outflow associated with the wagering business.
This represented a $14 5 million sequential reduction in operating cash flow.
Our expectation continues to be that operating cash flow losses will moderate further over the rest of the year.
Now turning to our balance sheet, we ended the quarter with $307 4 million of cash and cash equivalents restricted cash and short term investments.
We are confident in our current liquidity position and support of our global streaming business and growth initiatives.
Regarding our AD business, our focus has been on investing in our advertising team technology and infrastructure. These investments are beginning to pay off as third quarter AD revenue reached $22 5 million, an increase of 21% versus Q3 2021 and represented approximately.
<unk>, 10% of total revenue.
North America decreased approximately 12% year over year to $7 37 for the quarter.
On a sequential basis at <unk> increased 2% over the second quarter 2022 levels.
And September was <unk> strongest AD revenue month in our history with momentum building throughout the quarter.
We expect to see this continued strength in the fourth quarter with increased demand heading into the seasonally strong holiday period augmented by competitive midterm election cycle.
Now moving on to our guidance first we will discuss North America streaming and we are revising our guidance upward to total Q4 subscribers of 1.355 million to 1.375 million, representing 22% year over year growth at the midpoint.
Total Q4 revenue of $277 five to $282 5 million also representing 22% year over year growth at the midpoint.
And total full year 2022 revenue of 949, seven to $954 7 million, representing 50% year over year growth at the midpoint.
For rest of World our guidance is for Q4 subscribers, a 355000 to 365000 Q.
Q4, 2022 revenue of $5 million to $6 million and full year 2022 revenue.
$22 two to $23 2 million.
In closing given where we are as a business progress will not always be linear, but we are very pleased with our current momentum.
We believe we are at an inflection point and are excited about our path forward, allowing our customers while also executing against our profitability goals.
Okay.
At this time I would like to remind everyone. If you would like to ask a question. Please press Star then the number one on your telephone keypad.
We ask that you. Please limit your questions to one plus one follow up.
Your first question comes from the line, although our Martin with Needham.
Hi, Good morning, guys, let me start with advertising.
Just some granularity because I have argued was down 12%, but we have this direct sales force David and remember we're gonna add a direct sales force because we're going to help our arco, So and I would guess that September being our strongest months lets because of content and you've got the NFL back in September so I would've thought that would've.
<unk> not given it yet so I guess the question is could you just give us some more granularity on what's driving the lovely advertising growth David.
Sure why don't I kick it off and John can chime in first of all good morning.
Good morning.
Yes. So so you have to remember we have.
<unk> is not just for U S. English packaging, so we have a.
A different mix that comes in so the <unk> is probably not the best way to look at it when we isolate the English packaging.
From the rest of the packages that are available in North America, we see a pretty strong <unk>.
<unk> year over year on a CPM basis were up about 6%.
And again, we're looking at revenue right now, which was up 21% and just in terms of.
In terms of fill rate in terms of CPM and overall direct business, we've seen a significant uptick and we're very confident in the continued growth of the AD business, but again.
Our pre side youre going to see fluctuations at our for just really related to the mix.
And Laura let me add a couple of things to your question as well and to augment what David has said and so if we look at to say at <unk> in a vacuum in the U S. Only sequentially. It was up in the high single digits.
When we get to the fourth quarter on a U S only basis.
It should be solidly in the positive year over year and not that you asked is directly but I would just add in terms of our our AD growth. If you look at us I think versus some of the others that have already reported.
We put up some pretty good numbers and I think our outlook is probably a bit better and I think part of that is an outcome of to your point around direct sales I think that the.
The sales team additions that we made earlier in the year started.
Started to hit their stride later in the third quarter call. It three to six months. After they were they joined the firm and so that is also one of the benefits that we're starting to see coming out of the third quarter into the fourth quarter.
Fantastic. Thanks for that granularity on my follow up would be on gaining David when we came into the IPO you had to deal with and you'll all you walked away with is despite spoke to help close that gap could you talk about your negotiating position. When you are going back to like the draft Kings and Sandoz on how that's changed since you walked away from the Sandy.
<unk> arrangement, originally which it sounds like sort of what we're going back to now.
Yes, so just to be clear I'm extremely bullish on the integration of gaming and video.
Obviously, given the macro environment.
Have a responsibility to shareholders to make the right short and midterm decisions.
And so we are.
In discussions with I would say numerous books.
Beyond the ones that you are probably.
<unk> mentioned and these discussions I would say our.
Pretty healthy it's a very.
It's a very competitive landscape on the gaming side and if.
If you think about a 98% of our audience watches sports I was just looking at the numbers last night, that's pretty amazing.
Especially relative to an Amazon, where if you think about $150 million prime customers in the latest ratings whether you take.
Nielsen or whether you take their own numbers is still about 7% to 8% of audience. So we feel that.
We will have some really solid discussions over the next few months and we will look for a way to maximize the value of our assets both on the gaming side as well as on our audience, but I think those conversations will continue and again I think we're in a pretty good position.
Given the fact that it's a very unique asset.
<unk> being a unique asset.
And one more before we move on.
One last thing before we move on into back to the <unk> because I also want to bring it into the North America broadly as opposed to U S. Only because I think it's important to note that in the fourth quarter. We would expect the <unk> to grow on both a U S and Canada basis year over year, and so that should grow nicely.
Thank you very much.
Youre welcome.
Your next question comes from the line of sweater criteria with Evercore ISI.
Thank you very much for taking my question I guess my first one is on David your comment on CPM won't kill rate. So how should we think about that.
On a go forward basis, not only in the fourth quarter, but as more content from Disney and Apple and Netflix comes on.
Streaming how does that impact for both platform and then I have a follow up please.
Sorry, shred. It was your question related to <unk>.
Those companies launching AD supported.
I wasn't sure exactly where I'm going with the question, yes, So would tbms.
How would you expect to see P. M zone <unk> platform to trend in the near to midterm as more supply comes on.
So I'm actually extremely.
Streaming excited about the ads side of our business. We spent the first six months of the year really developing.
The platform focusing on header bidding solutions.
Other optimizations, leveraging some addressable deals for more sort of data integrations.
And we feel really good we have I would say CPM growth is still low.
<unk>.
You will up about 6% from last year. So that's a good sign we also differentiate from Netflix and.
In particular, just because we're heavily sports and news.
Oriented so I feel like we're still in the.
Very much the premium space, you could see that as John said.
A few moments ago that our numbers relative to everybody else has come out seem to be relatively strong and in particular our guidance. I think is also strong we feel very good we're continuing to see.
Strong momentum throughout October , but there is a significant room to go as I said, we're in the low twenties I anticipate.
When we hit our stride, we should be somewhere in the mid <unk> and then layering on top of that some addressed ability. We've also started to develop some new.
AD inventory, which is already sold out for the fourth quarter, we launched something that ive been tracking on Roku, which is their banner ads.
And they use their batter ads to drive sales for different video services site again.
In the same space, we have a customer that spends over $70. A month, we have a customer demographically, who is male skewing 18 to 49 and very hard to reach on traditional television. So I think the positive side of Netflix and Disney is that theyre actually going to take.
Our message to market.
So we think that buyers will probably be more active in the connected TV space, which again roughly 95% of our inventory is connected TV inventory, so with premium content at a premium demographics.
I feel very good about our ability to differentiate from some of the other offerings out there to continue to drive sales.
Thanks, David.
Just a follow up to that how big is political.
As a percentage of the overall business and my other question was on gaming any additional color on Hollywood thinking about it.
In terms of cost savings thanks, a lot.
So why don't I start on the political side and then I'll have John go from there.
Just on the political side, we have seen an influx of orders I would say about started about six weeks ago eight weeks ago, which.
I would say the cadence of those orders has increased to almost daily so it's.
With Cpm's that are well above what you typically would see in the third quarter. So I don't know if we can give a percentage, but I would say it's you can.
Yes, let me add little bit to that.
I'd say, it's in the mid single digit range I'll call. It of our annual revenue so not quite like a local broadcaster of course and I would also tell you relative to plan if you will.
We had a range of outcomes and I would say ultimately it came in about 10% or so above the top end of the range of outcomes that we expected.
And then could you just might repeat in the second question.
How should we think about cost savings from seeding your sports book just.
The change in gaming business.
Yes, so we haven't given a.
Sort of a range if you will in terms of the investment in the sports book, what I would tell you, though as you would suspect that it certainly extends our runway and so I think what we've said historically is that we have.
Cash through 2023, and then our cash needs and 24 are relatively modest.
I would say in broad strokes.
And then our exit than gaming.
Extend that.
I would also add don't forget that Q1 tends to be our highest cash use quarter from a seasonal perspective.
Okay.
Thank you John Thank you David Thank you.
Your next question comes on line of Darren <unk> with Roth.
Hey, guys good morning.
Just on the churn.
An all time low could you just speak to kind of what's driving that and kind of if you see any further downside and as a follow up just any commentary around the SaaS channel. I know you said you had 60 and I think the goal is 100 at the analyst day by the end of the year and just the benefit that's having to be AD business. Thanks.
Sure.
It was the first question sorry, sorry, Darren can you repeat the first question.
The first question was just around churn, David and just where you started that trial, yes. So.
During the road show in 2020, we set our long term goal was to hit sort of mid single digits.
I would say that we were pleasantly surprised.
To see that we actually hit that in the third quarter and that makes sense because as.
As you know our seasonal business September being the start of the sports calendar and so you have a return.
Customers that either pause there there <unk>.
Service or just return and so that feeds back into our.
Net ads and so I would say the brand is starting to drive a lot of value people come to <unk> for the sports and that's obviously supported by the number one.
Ranking in customer satisfaction across all of these other services, which I thought was another big win but.
People like the service they like the product and we're starting to see that follow through.
Not only from.
A net adds perspective on the growth side, but.
But also from the churn perspective, so we anticipate continued year over year blended churn to continue to decrease going forward.
The unrelenting catastrophe, yeah, and then on the fast.
<unk> channels.
So I'll give you a little more color on fast Aaron So for context, I think in the third quarter are fast as a percentage of AD revenue nearly doubled sequentially.
Not that it's a huge number but it certainly is a trajectory wise looking good from the perspective of the SaaS channels you are correct we.
We ended the third quarter at 60 as you saw in our release, we have added to that in October and the.
We'll see where we end the year it will be plus or minus 100, but if you don't get there by the end of the year, which I think we have a decent chance the deal will be there in early and early in 'twenty four 'twenty three.
And the runway there it remains I would say a pretty large yes, and darrin just to add strategically why this is important.
I'll give you some more color around that you have all of these plus services continue.
To try and migrate customers from bundles into their own services and so what we decided was continuing to add fast channels allows us to also push.
<unk> two channels, where we actually have more inventory. So just to give you a sense.
For the third quarter.
About 3% of our viewership.
On SaaS channels. So with this also allows us to do is to create better leverage for ourselves when we start to negotiate deals.
And over time, we obviously have more inventory in the fast channel. So this is something that we're going to continue to do.
So it should create two things one more leverage when we renew some of our entertainment deals.
And then on the opposite side. It should also be able to help us drive more AD revenue, albeit at lower CPM, but still.
Really allows us to sort of leverage all of the data capabilities in dress ability that we're developing now so we're very bullish on one on the ads business in general number two and our ability to keep people engaged on the platform.
Helpful. Thank you.
And your next question comes from the line of Clark <unk> with <unk>.
Hey, good morning, I've got two please.
John I'm, sorry, if I'm, prompting you to rehash right now, but for the fourth quarter guidance is there anything baked in for the World Cup and if there is can you compare that maybe.
Maybe what you saw with the Euro tournament and I guess I'm curious since there is less of a gap now between.
Domestically in the sort of Champions League content Post tournament do you expect maybe higher retention of any subs that you could be adding.
And then David just on the Pud, well gaining transition you talked about sort of.
The calculus around why you guys are moving away before and some components of that decision, but was there anything that you saw with or the idea of marrying live sports and betting options that ended up being either less compelling or maybe with the engagement not up to the level that you were initially expecting I'm just curious if sort of from a base.
Product and sort of user engagement.
Perspective, there was anything that turned out to be a little bit different than maybe you were anticipating thanks a lot.
Yes, you are starting to World Cup, Yeah sure Carter. Thanks for the questions. Yeah, So taking a step back at the midpoint our guidance assumes about 130000 net adds for the quarter that does take into account to some extent the impact of World Cup on both acquisition and reactivation and for context.
The Euro tournament, which was the summer of last year that was a key driver for that quarter, and we anticipate a higher number of trials owing to higher interest for the World Cup and I'd say given that the euros was broadcast in the summer versus the World Cup being broadcast during NFL I'd call It college football and the holidays.
Anticipate higher engagement due to cross viewership of non World Cup content, yielding better <unk> retention.
On World Cup sales relative to euro so maybe I'll leave it there.
I'll, just I'll just add to that I mean.
There are some.
There is some noise around the World Cup this year, which we've never experienced in the past as you know, it's now coming into the fourth quarter and that also.
Has to compete with NFL and college football. Moreover, if you think about just time zone wise. These gains are not in prime time.
So there'll probably be.
Assume somewhere around 10, a M. So that may also have some impact so, but we do anticipate that consumers will choose bubo over competitors during the World Cup and so we're we're certainly excited about that and we will follow that very closely and the teams are prepared to take advantage of any organic traffic that.
It comes in as it relates to gaming look.
Very upset about gaming in general because I do believe in that thesis more importantly, we had about seven to 10 days.
Of work in New Jersey, where without any marketing or really any activity we saw.
Daily and weekly upticks.
In new accounts.
Related to watching.
Through both channels on the platform so.
Think that our goal was to launch and start to tweak as we do.
Okay.
Improve the funnel and so the good news is that the technology is available and when we decide who that partner will be.
And obviously, we want to make sure that the economics make a lot of sense for us.
We'll continue to develop that product for third parties that might it might initially start with one.
Maybe down the line years from now two years from now we might decide that it might be best to just.
Create more of a market auction type environment.
For gaming so we'll have to see but it's touching go at the moment, but again I still believe that this is probably the best thing and you should also think about.
And maybe this is probably a good.
Segue into why.
We thought about this.
Initially.
Do you think about subscription businesses.
We're not just a streaming platform, we acquire subscribers with a sack that wed like to say is between one and one five times and so.
The whole point of acquiring customers is to be able to sell them.
More and more products and really sort of drive that relationship which is where the gaming piece came in obviously there are other things that we're also thinking about.
In those terms relative to a streaming platform, which really doesn't have a business model long term because you really you can't spread the acquisition cost.
Over just one single product, so I think that.
Probably changed our mindset, a little bit and we will be thinking more about how to leverage our base and drive.
Incremental revenue and margin.
By way of working with third parties, but in terms of the thesis.
I actually think more so now that this was actually a very good idea and just to remind everyone I know theres going to be some.
No negative feedback on shutting this down but the reality is when we announced that we wanted to do this.
30 year fixed rate was somewhere around two and three quarters right and today I think as of yesterday. The 30 year was seven 2% or something like that so the market has completely changed in the calculus that.
Came into that decision, making process back then and the cost of capital obviously has changed drastically in a very short period of time, but.
Again, I think we'll be able to take advantage of one of the data that we already have and also some of the technology that we've developed and also we're going to continue down the path of interactivity. We said all along that we want to differentiate our product and make it more.
More for whether customers are interested in the lean back experience or a lean forward experience. So we're very focused on that we're leveraging our data and again just the fact that we.
We received this great distinction of from J D power really highlights. The fact that we're onto something big and last thing I'll mention is that I do think that we're getting close to an inflection point similar to Spotify music, where there is no path forward for.
For most companies in the streaming space you cannot make money over the long term only because again our business is about spreading subscriber acquisition costs and selling more products, whereas media is really about lifetime value and I think the NFL has really proven when you have a very small tam relative to the global Tam.
How you slice and dice.
Cohort customers and create products for.
For consumers up and down the demand curve, whether it's a Sunday night broadcast of Thursday night football.
And NFL Red Zone, NFL plus product so.
I really think that as companies start to change the way they think about profits.
And as the market changes I think we're going to be in a really solid position to drive significant customer value.
Equally noteworthy at this point I would say probably.
Strong opportunities for media companies to monetize their content. So again, we're very bullish and.
In general.
Thank you both.
Your next question comes from the line of Nick <unk> with Stephens.
Hey, guys.
I wanted to ask about fast channels. Because this is honestly, it's a conundrum for me.
If a sumo user spend too much time on a fast on fast channels on that offering I would think they might wonder why they're paying a monthly fee to fu bow. When these fast channels are available for free the CTV operating systems like <unk>.
A roku vizio through which the users obviously accessing the flu bow app.
Obviously, I think that could then lead to a user dropping the service, but at the same time. This changes I guess, if the fast channels are exclusive.
And so my question is like how often is that the case for you guys, where you where you have exclusive fast channels and are you trying to push into these exclusive arrangements.
So that the fast channels you offer are only available on the <unk> app.
Yes.
Good question.
And I would like to answer it with another question.
And my question to you is with.
Broadcast television that's effectively free with an antenna.
Do people pay for broadcast television on cable that.
That is the conundrum.
I would say is <unk> is pretty much a gateway to television and entertainment is the way we look at it and so you're actually paying for the premium product the ability to watch NFL.
NFL in World Cup and all of these great sporting events all of your news programming and at the same time, we leverage our AI and discovery engine to surface content that we think is going to be relevant for you and so I'll give you. An example, so for instance, if you're watching a design show.
On Bravo Oran.
HGTV if.
If we surface a design show from a SaaS channel I don't think a customer will care, where that particular piece of programming comes from I think what's important in this case is that the customer understands that we're actually providing an amazing service the ability to give people all of the content.
In one place effectively efficiently with a solid user experience. So I think from my perspective again I use the NFL example, they've done a great job.
Core cohort users and slicing and dicing their content to maximize the value I think theres a play for us to be able to look for content that is very similar in nature.
The production quality and surface that content.
Your users.
Obviously that would help us drive engagement and help.
Drive revenues as it relates to exclusivity I think <unk> proven that it can compete head to head.
On a nonexclusive basis.
According to market Nathan and the market is growing at roughly around 13%, we're still continuing to grow.
Well ahead of that number I think somewhere between call it 25% to 30%. So our goal is to ensure that we have as much content as possible that's relevant to our user base. We do have some some content we have been developing as you know we have the <unk> sports network that continues to grow very quickly and that's being distributed.
Across the web and we have started on our relationship with Ryan Reynolds.
And so we'll look to produce some of that obviously supported by brands underwriting.
The content, but overall I look at <unk> as an entry point for television and over time.
I suspect what Youll see is youll be able to buy pay per view.
S T.
Watch free TV, and then have access to premium cable networks.
And plus services over time.
No that's fair Okay. So basically yeah. That's a good answer which is provide the consumer with as much content as possible and then part of the value prop is sourcing surfacing and providing it to the consumer whether or not you know effectively the consumer had to pay for that.
If you were ship or not.
Your existing arrangements.
Yes, Okay. That's fair that's good.
I did also want to ask.
Just because it's been choppy out there we've heard some pessimistic views for AD spend in the fourth quarter. Although some major CTV players you guys stated September was the best month of the quarter you seem very optimistic for the <unk>, if I'm reading you right.
Maybe just a little bit more detail here why specifically youre optimistic for <unk> I'm, assuming you guys are continuing to win new advertiser relationships, especially as the direct Salesforce Salesforce goes to work, but curious maybe like on existing accounts are you seeing the pullback on an organic basis or just.
Knowing that there have been some players that are.
Provided a very pessimistic outlook for <unk> can you talk about why you're so optimistic sure why don't I start and judgment chime in so look.
I would say that there are categories that are outperforming.
There are advertisers within nonperforming categories that are outperforming and so.
Really it comes down to a few things for us specifically.
Number one is you are now entering political season, which has.
You know puts pressure on the inventory that's number one number two you are at the height of the sports calendar.
Going into what looks to be a pretty cold.
Winter and so people typically spend a lot of time at home, we see hours viewed increase in the fourth quarter and into the first quarter. So.
I'd say the pressure on the inventory from political the addition of the World Cup.
We'll also create a lot of.
Interest.
In November and December and there are categories like retail or to some degree that are coming back and I think the advertisers are very interested in addressable inventory and I will.
I don't know if you know this already or this is something that I'll be highlighting for the first time, but if you think about where we sit on the spectrum between a television set a dumb television set.
And the consumer.
I would say that the vizio or are the Samsung or the roku as they are sitting.
At the opposite side of the spectrum right in front of the television right and so because we are sitting right in front of the customer we're able to collect an exorbitant amount of data on those users number one number two because we have developed our own AD proxy capabilities, we actually can decide which of our partners CS which data points.
And so I think that creates a lot more value for us.
And we obviously know our users better then.
TV platform Wood was just selling on a blind basis I would assume.
So from that perspective, I think we're pretty much in a strong spot where sports cpm's theyre going to be very strong you have new <unk> that are also on the rise just due to political and.
We've just launched our new banner ads on the homepage that.
From my understanding on one platform are already sold out so that gives us some comfort into our numbers and we expect.
Strong returns on the advertising side.
Throughout October and December .
Yeah, maybe one or two things to that as well.
Caught up with our sales team earlier in the week and I would add maybe a couple of data points one is that.
And I know that others have talked about cancellations and other things in terms of the scatter market, we have not seen cancellations.
I think also in terms of our exposure I think some of the weaker categories like crypto and others, we don't really have exposure to.
We don't really choose to take gaming money, but didn't really havent crypto money and those two are the weaker category. So and then on top of that I think that again.
Our advertisers again that they like our audience, they like our programming and they like alive.
Awesome. Thanks, so much guys congrats on the solid quarter and good outlook here. Thanks. Thank you.
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