Q4 2022 Fubotv Inc Earnings Call
Good morning, My name is Rob and I'll be your conference operator today at this time I would like to welcome everyone to the football T V fourth quarter and full year 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a quad.
<unk> and answer session, if you'd like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
If you would like to withdraw your question again press the star one.
Alison Sternberg Senior Vice President Investor Relations you May begin your conference.
Thank you for joining us to discuss <unk> fourth quarter and full year 2022 with me today is David Gambler co founder and CEO of for about and John do you need a CFO for about <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 <unk> 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 full year 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 and anticipated financial performance, including quarterly and annual guidance and cash flow and adjusted EBITDA targets our business strategy.
Plans expectations regarding innovation growth and profitability consumer industry in advertising trends the integration of Molotov planned launch a unified platform and expected synergies and market opportunity.
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 annual report on Form 10-K for the year ended December 31, 2022 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.
Except as otherwise noted the results and guidance. We are presenting today are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as discontinued operations.
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 Q4 2022 earnings shareholder letter, which is available on our website at IR Docs Bubo Dot T V.
With that I will turn the call over to David. Thank you Alison and good morning, everyone. We appreciate you joining us today I'm proud to report that for both global streaming business achieved record highs in the fourth quarter and full year 2022 across several kpis.
We delivered over $1 billion in total global annual revenue.
We exceeded over $100 million in annual AD revenue in North America.
And at the same time, we achieved a positive gross profit in Q4.
We also closed the year with 1.445 million subscribers in North America, an increase of 29% year over year and 420000 subscribers in our rest of world streaming business, an increase of 117% year over year.
2022 was an inflection point for our business. Our goal is to continue on this trajectory by expanding unit economics and generating positive free cash flow in 2025 my.
Friction and fragmentation continues to persist and extremely frustrating customers and creating challenging path to sustainability for media companies.
As a result, we continue to see the aggregation model and bundling as a massive opportunity.
Our service empowers consumers to seamlessly access all of their favorite content via a single app from anywhere in the house and on any device or operating system.
<unk> plays an important role in the media ecosystem, our customers already spent over 100 hours on our platform every month on average, reflecting the value we provide to media companies content creators and advertisers.
And as an aggregator and distributor of content. We will continue to work to advance on our vision and that is to give customers a gateway to all TV.
Surprising and delighting them with a personalized and seamless user experience.
U S consumers are already supporting our vision, we are extremely proud to rank number one in J D. Power's 2022 customer satisfaction survey and our live TV streaming providers.
We believe this proves that consumers understand the value of an aggregated multichannel streaming platform and in particular for both differentiated sports first offers.
On the content front, it's becoming clear that we have more leverage than we expected due to the certain content drops that historically have had almost no impact on subscriber growth and retention as we optimize our content portfolio through our first party data we plan to selectively carried content that will drive subscribers and leverage our increased scale.
As a result, we expect to drive leverage on the subscriber related expense line on a year over year basis going forward.
Before John dives into our subscriber guidance I wanted to give you added context.
<unk> has always punched above its weight class. We've recently increased prices of our U S based plans by $5. Additionally.
Additionally, we priced up against the recently added valleys are sounds from 11% to $14 to be able to offer. These in all <unk> in our base plan and to the widest number of consumers.
In aggregate. This is a major price up of 16 to $19. Our biggest increase and the first time, we raised prices in Q1, which is typically lighter on sports content.
The price up and its timing coupled with the World Cup cohort and typical Q1 seasonality is why we are delivering a conservative sub guide.
That being said we are still very excited about our growth prospects in 2023 and beyond.
Following these moves in Q1, we have been very pleased with our early retention metrics and are monitoring closely.
The estimated impact of the 2022 World Cup, we believe we will maintain double digit subscriber growth in 2023.
We also remain committed to Super serving sports fans, which is at the core of our brand DNA <unk> is the home for local sports coverage as evidenced by our carriage of approximately 35 regional sports networks.
Our our ascend portfolio gives us leading coverage of baseball when notably a large virtual mvpds recently reduced their coverage significantly.
Oh now delivers at least one RSM to nearly every U S subscriber and is the lowest cost streaming option for local teams.
SaaS channels are a growing component of our margin expansion strategy as it relates to the leverage in our subscriber related expenses SaaS channels helped us achieve two goals. They provide a wide range of content, creating more fungibility and negotiating leverage with content partners. They also provide us with significantly more ad inventory.
Relative to our current cable network deals as a reminder, we do not have any inventory with broadcast networks.
The 80, plus fast channels on our platform generated 5% of total AD revenue in 2022 significantly up from 1% in 2021 Thats why we are working to improve discovery of our SaaS channels to deliver even more ad inventory.
In general our advertising business continues to outperform growing 30% in Q4 on a year over year basis, despite a very difficult quarter that impacted the entire industry.
Our largest advertisers from 2021 increased total spend with us in 2022 by 85% and we added a record number of new brands.
While we are excited about our success last year, we still have much to do this includes improving our AD tech integrating more data products and packaging up our inventory.
On the product front <unk> has historically been first to market among virtual mvpds with new features and capabilities from <unk> streams to multi viewer.
Our internally built tech stack has enabled us to be ahead of the innovation curve.
We see AI and computer vision products is a natural evolution of our commitment to interactivity.
In December 2021, we acquired a company called Edison.
Hi.
Anticipating the power of artificial intelligence and computer vision to evolve the consumer experience and augment our advertising capabilities with this technology, we can programmatically understand what happens in each frame of a live stream in real time.
We are now focused on building product features that can allow sports has to lean forward and choose to engage on a per play basis not just on a per game basis. Additionally, we can leverage this tech to reduce costs and maximize the value of our fast channels introduced new AD products and optimized subscriber growth.
We currently have multiple patents pending with this technology.
We're excited about the initial results of our new capabilities and we'll also continue to explore opportunities with certain cloud providers about implementation on a <unk> basis, we look forward to sharing more on our progress in the quarters to come and.
And finally, the fourth quarter also marked the one year anniversary of our Molotov acquisition.
The acquisition has been a success delivering strong growth of our rest of world streaming business more than doubling subscribers in achieving meaningful revenue growth all with a modest marketing budget.
Molotov freemium model has proven to be effective and efficient something we continue to evaluate as we think about the future of our business.
I could not be more excited for 2023, there are still more than $62 million traditional pay TV consumers here in the United States and a disproportionate number of cable customers, who are cutting the cord continue to choose <unk> over many of our competitors.
In summary, we are very pleased with our record Q4 and full year 2022 results. We are continuing to prioritize profitable growth and remain confident of our mission to deliver a leading global live TV streaming platform differentiated by the greatest breadth of premium content and interactivity.
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, we had a strong quarter across our kpis, including subscribers total revenue and AD revenue and delivered results well above our forecast.
For the full year total revenue was 1 billion, a 58% increase versus $638 million in 2021. This.
This includes North America streaming revenue of $984 million and rest of world streaming revenue of $24 million.
Within the fourth quarter, North America subscription revenue was $278 million, representing 36% growth year over year.
This was driven by subscriber growth as well as total ARPA, which was $72 50 <unk>.
Representing a 4% growth year over year.
In the fourth quarter, North America advertising revenue was $33 6 million, representing 30% growth year over year.
We added a record number of new advertisers completely sold out our World Cup AD inventory and had a record breaking political season. This reflects our efforts and success to continue to expand our relationships with our largest advertisers.
Now moving to rest of world revenue in the fourth quarter was $7 2 million.
While our focus is primarily on integration. We are pleased with the performance of Molotov, particularly as subscriber growth and cash flow has continued to trend ahead of our expectations.
Turning to our path to profitability.
As we announced in October we ceased operation of our sports book in <unk> in support of this as a result to allow for a meaningful assessment of our streaming business. The following results are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as this.
Continued operations.
On our subscriber related expense line, we reported modest operating leverage in the quarter.
Importantly, we expect deleverage in that sorry to accelerate meaningfully in 2023, as we remain focused on improving operating leverage across all of our key cost buckets.
Importantly, we also achieved positive gross profit of $3 million for <unk> and while we expect typical seasonal patterns in our business. We believe gross profit and all our key operating metrics will continue to improve on a year over year basis in 2023.
Moving down the income statement net loss in the fourth quarter was $95 9 million.
This led to a fourth quarter 2022 earnings per share loss of 48.
Inclusive of a <unk> <unk> impact from operating expenses associated with the <unk> business acquired in the <unk> 21, compared to a loss of <unk> 64 in.
In the fourth quarter of 2021.
Fourth quarter adjusted EBITDA loss came in at $75 4 million compared to a loss of $73 4 million in the fourth quarter of 2021, and adjusted EBITDA margin was minus 24%.
814 basis point improvement year over year.
Adjusted EPS in the fourth quarter of 2022 was a loss of 39.
But note that adjusted EPS excludes the impact of stock based compensation amortization of intangibles amortization of debt discount and other noncash items.
In the fourth quarter, we achieved cash usage of approximately $24 million, including $3 million related to the closure of our gaming segment and our most favorable and our time as a public company.
Our expectation continues to be at that operating cash flow losses will moderate meaningfully in 2023.
On a full year basis 2022, adjusted EBITDA was negative $323 million.
We believe 2022 represents peak losses for our business.
And both adjusted EBITDA and cash usage will improve on a year over year basis going forward.
From a capital structure standpoint, we remain highly disciplined to afford <unk> TV, the financial flexibility to fund measured and disciplined growth initiatives.
As of December 31, 2022, we had $209 7 million shares of common stock issued and outstanding.
As it relates to our balance sheet, we ended the quarter with 340 to $3 2 million of cash cash equivalents and restricted cash. This includes $63 2 million of net proceeds from securities sales pursuant to our at the market program.
Now moving onto our guidance.
Our Q1 2023 guidance reflects our continued emphasis on <unk> and unit economic expansion.
And projecting <unk>, we took into account the impact of seasonality the strong benefit from the World Cup in <unk> 2022.
Our recently announced price increases and our announced content portfolio optimization or.
Our North America, <unk> guidance calls for subscribers of $1 million 140000 to $1 million 160000.
And net revenue of $295 million to $300 million.
While the <unk> subscriber guidance represents 9% growth year over year at the midpoint the revenue guidance represents 26% growth year over year at the midpoint.
This reflects our emphasis on <unk> expansion and strengthened unit economics with revenue growing at roughly three times forecasted subscriber growth.
For the full year, our expectation is for subscribers 1.510 million to 1.530 million, representing 5% year over year growth at the midpoint.
And our revenue of $1 billion and $195 million to $1 billion $225 million, representing 23% year over year growth at the midpoint.
This again reflects our emphasis on <unk> and unit economic expansion with revenue growing at roughly four to five times forecast the subscriber growth.
Within our rest of World segment, our expectation is for <unk> 2023 revenue of five five to $6 5 million as subscribers of 368000 to 373000.
And full year 2023 revenue of $24 five to $28 5 million net subscriber adds of 395000 to 415000.
In closing food by delivered record fourth quarter and full year results across a number of key financial and operational metrics.
We are now ready for our question and answer session.
At this time.
Excuse me I'd, just like to quickly make an announcement.
John I am thrilled to announce that we raised gross proceeds of approximately $68 $1 million. This morning, and block trades at a negotiated discount to Friday's closing price under our ATM program. This helps fortify our balance sheet and advances on our path to achieving our positive free cash flow.
In 2025 more importantly, we believe this financing demonstrates our continued ability to access capital as needed. Thank you.
At this time I would like to remind everyone in order to ask a question Press Star then the number one on your telephone keypad.
Ask that you please limit yourself to one question and one follow up your.
Your first question comes from the line of Sweater, Jerry <unk> from Evercore ISI. Your line is open.
Okay. Thank you for taking my question.
Would you please talk about the early impacts you're seeing from.
From the price increase on churn I understand the guidance and the combination of <unk> sub growth, but what just what have you seen on on churn and retention rates from price increase and could you. Please also remind us the timing of when the price increase actually went into effect. Thank you.
Thanks, Brian This is John I'll start and thanks for the question, Yes. So for a reminder, we announced the price increase.
January 6th for new subscribers and then it kicked in on February six or so for existing subscribers. The price increase was $5 and then there was another increase on top of that for for the RFS subscribers.
I would tell you that to date, if we look at the cohort of existing subscribers starting from February 6th we only have call. It two to three weeks of data.
I would tell you we expected elevated churn, but I would say that the churn that we are witnessing actually has come in below what we would've expected.
Also tell you that our marketing team is doing a great job in terms of.
Coming up with different ways to reach potential subscribers and we're also seeing I would say better.
Trials, if you will to start the year, David anything else worth of that or no. I think you. Thank you.
But I would also say that.
With the guidance that we provided was relatively conservative just because of the price the size of the price.
Was pretty significant.
The five dollar based price plus the 11 to $14 <unk>.
It was a pretty pretty significant.
So if you think about that what's the timing of the price that we typically price customers up in the third quarter. So this was our first time pricing of customers in the first quarter.
And then you have you would add on top of that the regular seasonality.
Plus the other noise, such as CBS affiliates and we felt.
We would.
Add to that.
Side of conservatism on this but as John said.
We've been very happy with retention.
Albeit it's only been about three to four weeks at the moment, but things are located.
Very good and we're very confident about continue.
Continuing to drive growth double digits ex World Cup for 2023.
Okay. Thank you David Thanks, John a quick follow up Lynn. What's is this the first price increase ever or if not when was the last one you did how much was it and what was the impact and that's it for me. Thank you.
Yeah sure so what I would just say.
To your question, we did announce the price of $5 I think it was on April 2nd of last year and again that was for new subscribers for the pro and elite package and then it was Princess subscribers 30 days later, so call it around <unk> of last year I would note that.
Continue that theme if you will.
We saw a little bit less churn than we would have expected in the second quarter as well I know, there's some investors had concerns around.
Would there be a tail if you will through the summer and just as a reminder, I would say that we saw the lowest churn ever for the company in the third quarter of last year.
Your next question comes from the line of Laura Martin from Needham <unk> Company. Your line is open.
Good morning, very nice numbers, you guys I'll ask my two together Youtube TV you guys are differentiated sports first virtual Mvpds and Youtube TV. Your biggest competitor doesn't have they ticket how do you retain what's the impact on you if they become viewed as a sports first competitor. That's first and then bally's RSM if they run.
Into financial distress tell me, how the money works for your commitment and what you think that does to the value of your bundle place.
Yes, Hi, Laura how are you all.
Alright, alright.
Alright.
John talked about.
The <unk>.
Situations. So just in terms of Egypt, TV look where two companies that.
As of now are positioned to be sports first.
We took we've taken a very different roads I'm actually very bullish on the direction that we've taken the RSM.
Tap is significantly larger than that of the Sunday ticket and Youre talking about 25% to 35 million sports fans and care about their local sports.
There is still.
And the cable ecosystem at the same time historically, we've seen at the Sunday ticket average is about 2 million customers.
So.
And I think that we've taken.
Proper direction to Super serve sports fans, we have some solid data around <unk>.
And with respect to the Sunday ticket, we never actually had to Sunday taken so we don't see that to be.
And impact and lastly, I would say that Youtube Tvs not selling that exclusively I believe Youtube premium will also be selling.
Sunday ticket. So basically you don't actually need a Youtube TV subscription to get it if you want it so our customers will have access to that to say so.
And Laura just on the Valley, it's Brian I don't want to get too into the terms of the contract itself, but I would say that we do expect the games to era and I would also add that the term of the deal is very short term.
Thank you very much great numbers you guys.
Thank you.
Your next question comes from the line of car Park Lamping from <unk>. Your line is open.
Thanks, a lot good morning.
Covid I wanted to go back to the comment that you made before Q&A began I think you talked about $70 million or so of financing as of this morning, So maybe pro forma something like $400 million of cash on the balance sheet does that put you guys in a better position to know sort of navigate towards breakeven cash flow levels.
In 24, or 25 or is there sort of moderate incremental sort of financing that you guys might need from here.
And then stepping back I wanted to see I guess, if you could talk about sort of underlying sort of cable and AD market trends.
For the latter you talked about how.
The fourth quarter was strong from a sellout standpoint, how is the early part of 'twenty three trended.
Relative to that or maybe what should we expect I guess sort of going forward.
Hey, Clarke, maybe I'll start with that and then maybe I'll take the second question first and maybe give you a little bit more flavor around that.
For context in the fourth quarter.
Everyone's heard by now in terms of what the market looked like I would say for US I think we certainly outperformed the CTV marketplace and that we grew around 30%. The CTV market probably grew in the call lowest 20th yourself from a month to month basis October was the best month November 2nd Best and as expected December 3rd Best.
It was also up double digits for us.
As we roll into Q1, what I would say is that if you think about that cadence January for US was probably the bottom and then we're seeing a bit of improvement in February and then although early call. It.
Expectation would be that we would see further improvement into March.
Things are firming up a bit from a categorical perspective for Q1, what I would tell you is.
Some of the categories that are or.
Alright, looking better for us would be say business auto is actually looking decent.
Arsenal apart as retail and health and fitness.
That's the piece as it relates to the.
The cash component.
I'd say a couple of things there you are right. What we've said is that the.
We had to raise some capital to get to self funding in 'twenty, five and I would note that for the fourth quarter, our cash usage.
As color around $20 million.
It's kind of like some gaming cost and said the best quarter by far ever as it relates to cash usage.
We had our 10-K filed this morning, you may have noticed in there.
We had a clean audit and so that suggests we have cash to get at least through the next 12 months. So that gets us into 'twenty four and as I said and David said before will be self funding in 25. So this further bridges that gap.
And narrowed that that's pretty significantly and then I'd also say that we may want at some point to have a little bit of cushion as well and if we find things to invest in the business that have high returns we'd consider doing that.
And if I could just ask a quick follow up I know you guys don't formally guide to EBITDA or cash burn levels, but in terms of direction are there seasonal factors or maybe relative levels that you could comment on to give us a better sense for how the year should trend or maybe shake out.
Yes, sure. So let me help you directionally on that for context.
Our cash usage was about $330 million for.
For the year in terms of 2022.
For 2023, Youre right there is seasonality in <unk> and <unk>.
From covering US Q1 is always our worst cash burn in the quarter for the year and so I would suggest that.
For those who are modeling do not annualize the Q1 cash burn it will be better year over year Q1 to Q1 23 versus <unk> 22, and then we expect that quarterly improvement in terms of the cadence for each quarter throughout the year.
Clearly, we should get to a number in the fourth quarter of this year.
Somewhat modest as it relates to forest <unk> cash usage.
I just wanted to add one more thing.
We have been.
Working tirelessly to continue to.
Improve the financial profile.
If you look at it.
Just in terms of our expenses.
Our leverage from <unk>.
Almost every line we are now very focused on subscriber related expenses, we're spending.
Call it $900 million a year there isn't a media company in the United States that would not want that.
Money.
Very difficult to replace we have about I would say half of our deals are up in the next 30 months or so.
We anticipate that we will be able to upgrade some leverage youre already seeing it on the.
Yes.
On the <unk> line.
Youre seeing very slight downtick on the SME one we've raised prices now in the first quarter again, an attempt to really drive down cash burn.
And an increased profitability and we're very focused on our content partners. One thing I will say, it's quite interesting.
Job two well.
One will drop and drop one table partner at the end of 2022 on December 31, we see relatively no impact.
And at the same time.
Affiliates didn't redo that tactic im not sure it works in their favor.
We haven't seen any.
Negative implications.
So far.
There's been some noise about it but we feel relatively strong position to be able to negotiate.
Better rates going forward. So we're excited about.
This year.
We are very much on track with.
With respect to what we know today.
Towards hitting our 2025 target.
One last thing you didn't ask this directly but indirectly because they're related.
We did have positive gross profit in the fourth quarter and I would again say that we expect.
Positive gross profit for the year variability quarter to quarter, given seasonality, but I would say we should be comfortably gross profit positive in 2023.
Your next question comes from the line of Phil Cusick from Jpmorgan. Your line is open.
Hi, guys. Thank you.
I Wonder if you can just talk go back quickly to the free cash flow your.
Working capital this quarter and the fourth quarter was nice.
Support of cash I Wonder if you can expand on that and whether thats durable from here and can continue and then you've got a number of content contracts coming up in 2023 and 24, what do you think has the potential to actually reduce per subscriber fees on those rather than just see slower increases than you've seen in the past.
Okay.
Okay.
Yes.
But as I said when you look at the extreme losses relative to the.
Payments.
Sending out monthly and you look at our growth rate relative to.
Affiliate.
Growth rates its clearly.
Yes.
Overpay, and so whereas moment in time, where we feel very comfortable that we only need 80% of the gross rating points.
To continue to grow meaningfully and take disproportionate share, where we continue to do quarter in quarter out, which was particularly evident in the fourth quarter of two other reported.
So we're going to make that note.
It uses.
We dropped a number of partners over the years and as you see from the value of our sales we will.
Work on deals that make sense that are mutually beneficial.
And we'll bring console partners back and continue to optimize.
Our content bundle as well as in 2025, but this is clearly.
One of our main items that coupled with advertisers.
Again, just based on early indications from a retention perspective as well as the relatively.
Limited APAC with respect to the content drop on December 31, coupled with the affiliate.
Rob as well.
On the CBS side, we feel very comfortable that we're in very good position to negotiate improved yield and so I would just add on that on that topic.
So that I've been here.
Probably seen about call. It 10 deals of varying size over the course of the past 12 months and the majority of those did see rollbacks as it relates to pricing of those deals. So that may be able to help you a little bit around that and you have some context in terms of working capital, but there are obviously some swing something we work on constantly.
There's also some seasonality to it so maybe we can help you more with that offline, but what we can do to try and Brian that to our favor.
If I can follow up I see the headlines coming across now on the $68 million.
So can you just remind US you did I think $60 million in the fourth quarter another $68 million. This morning.
And you say there is probably more ATM to come.
To build your cushion, but without that do you think you could be.
Get to that breakeven point in 2025 on your numbers.
I would say that we will get close.
To get to those numbers without any further capital raising and so what we said before is the Nida is relatively modest and I would say now that we feel very confident.
We can get there in the short to medium term.
Capital is at a price that we're willing to accept.
Our next question comes from the line of Darren <unk> from Roth Capital Partners. Your line is open.
Hey, good morning Dillon on for Darren Thanks for taking my questions.
Okay.
Could you talk a little bit about on the advertising side.
What the contribution was from political and the World Cup as well given those are more cyclical in nature.
Yes, I'll start I don't know that they have a world Cup number here, but I would tell you that we've talked about political that number it was around I think $4 million or so for the fourth quarter.
Have the World Cup number in front of me I'm not sure if David does but we can get that to you later on.
We typically package up World Cup with other sporting events.
Throughout the quarter, so, but we can certainly get back to EBITDA.
Great I appreciate it.
Follow up.
When you sort of look at the guidance with subscribers could you maybe provide some more color on the churn or just the drop off in Q1.
How do you think about what's from the price increase whats maybe World Cup subscribers and then is any of it related to subscribers who might have been with you for over a year now rather than the typical seasonality from second half to first half.
Yes.
Hey, guys.
Q1 has a lot of noise in it.
And we were attempting to be somewhat conservative given all the nuances and I'll just give you a kind of five and my view five nuances that we needed to think about as we went into the guidance.
One is we pulled forward on the World Cup cohort.
First of all I'll say quadrennial event.
And not only that it also happened in December so.
If you think about that as a pull forward that was one.
Item that we had to think about as it relates to Q1. The second item is the obvious seasonality of our business with the NFL and the Super Bowl.
Closing out in February which typically is a.
A weaker quarter in terms of subs.
Historically for the virtual Mvpds space. The third is the price up which was a relatively.
Larger price up than we typically would price up.
And then also the timing of the price of which we mentioned earlier was the fourth item and then last but not least which we did not prepare for was the CBS .
Affiliate situation, which caused somewhat by surprise.
And therefore, when you put these things together, we just felt.
We should be slightly more conservative.
But historically most quarters I think we guided appropriately and then as in the last quarter, we were able to exceed guidance.
In terms of and the reason why I'm, a little bit more comfortable right now, although we only have about.
Four weeks of our.
New pricing in play we have been tracking our retention and churn levels daily and they are performing very well relative to our initial forecast and so obviously there are some time delays February 28, obviously is an important day because it has to.
The last day of the month and typically includes.
Churn for end of the month for the 31.
The 32009, and the 2008, so theres four sort of churn based all in one so that's the reason why we decided that we'd rather stay somewhat more conservative, but we feel really good about the quarter and we feel very good about the year.
Your next question comes from the line of Nick Zheng from Stephens. Your line is open.
Hey, guys.
Congrats on the strong results and progress here.
It doesn't sound like there's been much of an impact from the CBS affiliate in past, but I'm curious what steps you are able to take if any just to gain access because I would assume you want the content because its local news valued by consumers and as of right. Now you are the <unk> that doesn't have.
Have access to it whereas your competitors do so is there any way to negotiate with the affiliates directly or does this just all have to flow through Cvs.
What.
What can you do directly with them to gain access.
Yes. So I think there is let me unpack that there's sort of two components to this one is this is a.
Sure.
Negotiation between CBS , specifically and.
And the affiliates, we don't participate in that we've negotiated.
<unk> pricing with CBS .
It's.
It's their job to secure the deals with the local broadcasters. That's one side of it the other side of it is that you are correct. It's great to have local programming I think the good news is is that.
This local news is no.
Headley available on a number of SaaS platforms, and so I think that customers that are looking to get that content are probably able to find it very quickly elsewhere.
So we have not seen much of an impact there I think the problem is that everyone is looking to double dip.
And.
We've demonstrated that we're happy to pay a premium to bring in content that we feel.
It's valuable to the bundles such as the regional sports networks.
And at this time I think what's happened is we've realized that what we may have again have even more leverage than we initially.
As anticipated, particularly since we are growing double digits year over year. So at the moment for US we're kind of in a holding pattern similar as you are waiting to see how this nets out.
We're going to let this play out for a little bit longer then obviously it will reach out and see if theres anything that we can do to help but under no circumstances is this programming required for us.
Given the retention levels that we've seen it's certainly something we would love to return them.
Got it and then just a longer term question for you that subscriber guide.
For the year.
2000, 22023 relative to your goal of $2 million that you are aiming for it to in 2025 I.
I think you might need like a 15% CAGR from 2003 and beyond to get to it.
Calling for 10% growth in 2023.
So the question is.
Following 2023 are you banking on acceleration of cord cutting baking on market share gains and for the 10% I know, it's the underlying growth, but that that 10% that you're guiding for this year does that include any weight on it by like recessionary concerns like do you think it could have been higher but like given the.
The macro and what Youre seeing right now you want to be a little bit more conservative in that guidance.
So again don't hold me to this.
I believe.
The eight to 10 or 10 of 10 or 11 quarters that we've been public we've be.
I'd say almost all of them except for <unk> and.
And the two that I believe we did not work for Q1 and Q2 numbers. So as I said there is some noise in that first quarter number.
Which has about five items that I think could have some impact material or not that will be evident in the next few days for us.
For the year, we feel very comfortable there are still 60 million plus households have cable and as you know our job is to pull from that existing market.
If you again look at our fourth quarter numbers, you'll see that we are continuing to take a disproportionate share of customers into the virtual mvpds space relative to the reported companies that you've heard from.
Very recently, so from our view.
We're going to continue to take share and.
The number the 2025 number you just mentioned is something that I don't think is very far off from our current pace.
But I do.
Anticipate that as the product continues to improve.
We continue to focus on more profitable customers that.
We think that there will be some re acceleration over the course of that period.
Yes, Nick I don't know if you had also just.
As we look to the end of the year, where we are going to be launching our unified platform and I would just say that that I think it gives us some opportunity to more of let's expand the funnel.
Then drive more subs coming through and so youll start to see that if not end of this year timing wise.
Very very early next year, but probably sometime later this year, yes. The only other thing I would add is that if you look at our.
Our paid marketing.
Numbers, you'll see that we're continuing to acquire customers at the same level that we've acquired.
Three years ago, which is roughly a one to one five times first months.
Of that number.
It continues to fluctuate closer to the low end of that range and so again, we're very comfortable youre seeing leverage on that line. So.
There is certainly where we've also grown <unk> since going public and so I think we went public with about 550000, maybe less customers now.
In our North America at $145 million so.
We've seen slower growth when we went public initially and we've seen a reacceleration again. This is just one quarter, we're very comfortable and the World Cup pull forward, which is something we expected we would expect it to the degree.
Ed.
We actually delivered so again, we're very comfortable with.
<unk> got solid product supported by the J D power ranking number one.
Within the live TV streaming category, we continue to double down on our brand, which is sports focused and differentiate their we're doubling down on our on our product capabilities.
I mentioned some of the AI stuff that we're working on which will allow us to really develop a little bit more interactivity, hopefully there'll be some testing that will be available to customers towards the end of this year.
And then we're continuing to differentiate on the content side as well.
Adding in the valleys are sent to Super serve sports fans all aboard I don't think Theres anything that would make me feel uncomfortable with respect to hitting the 2025 target.
Your next question comes from the line of Jim Goss from Barrington Research. Your line is open.
Alright, thank you.
As Warner Brothers discovery approaches the launch of its <unk>.
Combined.
HBO Max type service that could have.
Turner Sports programming is there any opening that you might have to create a deal with them to create an add on service that would deliver both sports that use.
Sort of that his.
Seem too expensive.
It also would deliver added content sort of as an add on as an incremental bonus value to them daily deal.
Yes, so Jeff this is David.
Well first I'll say that.
I have a deal with discovery that does not include Turner, if you will.
We dropped Turner when Turner was under the AT&T umbrella so we haven't.
<unk> had.
<unk> had conversations yet with the discovery team.
We would love to Cary Turner, obviously that would have to be accomplished at a level that we feel it makes sense given our subscriber related expense line.
But what's also interesting is that as I've said.
Ted.
Previously, we only need about 80% of the gross rating points. So we're.
We are open to doing deals we are open to optimizing our bundled cost.
Delivering the best content portfolio.
And product that we can to our <unk>.
Customer base so.
Hopefully that conversation will take place.
At some point.
Obviously, our teams are constantly speaking to all of the content providers on a regular basis. So we will keep you posted should there be any any changes there.
Okay.
With the.
Difficult World Cup comp is there any way to carve outs like subscriber attributions for their particular aspect to that.
I guess it was a little bit applied in some of the normalization of that.
Changes year over year and quarter to quarter.
How many do you think joined.
Drawing more for that than anything else.
I don't know if we have an exact number.
Yes.
I would say that.
Again, there were several things that were happening in the fourth quarter.
Strong NFL.
And to.
The season for us.
By the way is not impacted at all by Thursday night football, either which really speaks to the power of the platform.
I would say that look it's tough to say right now because so many of our customers I think let me put it this way when I think back to the 2018.
Screening cohort for the 2018.
I can tell you that the churn level based on the first few weeks was significantly higher in 2018 versus 2022. The second thing I'll say is that the types of customers that came in at <unk> came in only to watch the World Cup, what we're seeing is probably why.
A feeling a little bit more comfortable with our initial Q1 retention.
Numbers is that these world Cup customers are actually watching other programming as well. So this is new territory for us.
And so we're just kind of again being a bit conservative I would say, it's probably in the.
Sure.
I would say maybe low to mid teens maybe.
In terms of that cohort.
That's just a clean I would say World Cup cohort, but clearly a trove.
<unk> strong growth.
Particularly in the beginning of the World Cup. So those those users typically stay on longer than the ones that just come in for the final so again tough to actually quantify at the moment.
Yes, Jay maybe I can help you a little bit more with that and I think it may be too soon to know.
We had the team looked at was the number of subscribers that actually watched a more than a certain number of hours and the World Cup.
And I think it's too soon to know.
Does it turned up yet because they.
They may not turn off for a while they may not turn it off to David point in terms of that double digit number I think in terms of the <unk> as a percentage.
Of sub growth for the fourth quarter, it was probably somewhere in the low low to mid tens of thousands.
Yeah.
And I will now turn the call over to MS. Alison Sternberg.
Thank you operator as part of today's Q&A session. We have partnered with <unk> technologies for the first time in order to open up a new shareholder Q&A platform and this allows all of our shareholders to submit.
Questions to management, we elected to use this platform because we really wanted to make sure that all of our shareholders have a voice and are empowered to engage with us. So we decided to focus on answering a handful of questions that were top ranked on the platform.
And David I am going to direct this to you. Our first question <unk> got a lot of votes.
Is the following.
Or do you see the future of <unk> going.
Okay.
It's a very broad question.
No.
I think that.
There are two very strong trends here one is that continuing.
Continuing to experience the secular decline.
Traditional TV and.
<unk> continues to take a disproportionate share of customers can be very competitive field.
And.
Again, hitting that $1 billion of revenue milestone coupled with the $100 million of advertising sales.
These are really strong numbers, we're very confident about the future of our products.
Again, it's probably I would say one of the best products in the world relative to what.
Principally used and tested and we're continuing to really improve that both with our team.
In France, as well as our team in the U S and our newest team, which is the team of Edison AI, which is now <unk>, India, which is continuing to innovate around the products really deliver.
An interactive experience and provide users with some really.
Strong metadata to be able to discover content and better ways to be able to interact on a sort of a play by play basis versus on a per game.
Basis. So we're doing lots of interesting things, we're obviously very relevant customers are.
Are voting with their wallets.
We have almost one 5 million customers at the end of the year in North America.
We're seeing great growth in <unk>.
<unk> from Molotov when we unify our platform. We think we will continue to be able to absorb more cost cutting.
Measures to be more efficient.
And also increased product velocity, so I'm very bullish I don't know if there are many companies like us that are performing and executing the way we are and at the same deliberate.
Product that people love, so I feel like we're in a very good position.
For growth.
Confident in 2023 and also reaching.
Self sustainability in 2025.
Second question that got a lot of votes on the platform was related to the competitive landscape. So specifically what is going to do to compete with the likes of Hulu and other streaming services.
Yes look this is a question that people have been asking us since 2015, when we were probably two or 3%.
Subs.
A company like Sling for instance.
We're continuing to take a disproportionate share said that numerous times now I'm not sure. It sinks in that we're doing that.
Our growing growing faster than the virtual mvpds space.
We're going to continue to grow quickly.
We have I would say differentiated content offering.
On a differentiated product.
And people are choosing to move up every single day.
And so.
I think that we're competing across three vectors.
Just stated one on brand we are clearly sports focused customers choose us first for the sports.
Evident in downloads of circuit.
Of apps.
Frankly during <unk>.
Big Sporting event days or beginning of a season you.
You will see that in the NFL and you'll see that during a world cups and other major events. So.
And we're also differentiating on product that's the one where I think this is the toughest for other companies. Because this is our DNA, where our product technology company similar to Netflix or Spotify and over the long term I think that we will be one of the leading players in the space in the United States for sure.
The potential opportunity 510 years from now to do this globally. So we're positioning ourselves for the future. We're excited about our business and excited about our ability to drive value for our media partners and drive.
Excellent experiences for consumers.
Great David Thank you for that and big Thank you to our shareholders for your engagement and your thoughtful questions on the same platform.
Now going to turn it back over to the operator.
This does conclude today's conference call. Thank you for your participation you may now disconnect.
Yes.
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