Q3 2024 FuboTV Inc Earnings Call
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Speaker Change: Ladies and gentlemen, thank you for standing by my name is desert rain I will be your conference operator today.
Speaker Change: This time I would like to welcome everyone to the food those third quarter 'twenty 'twenty four earnings call. All lines have been placed on mute to prevent any background noise.
Speaker Change: After the Speakers' remarks, there will be a question and answers session.
If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad.
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Speaker Change: I would now like to turn the call French over to Amit that D. S. VP Investor Relations you may begin.
Amit D: Thank you for joining us to discuss <unk> third quarter 2024 results.
Amit D.: With me today is David Gambler, cofounder, and CEO of <unk> and John's Anita CFO of Grupo <unk>.
Amit D.: 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 Bubo dark television.
Amit D.: Before we begin let me quickly review the format of todays call. David I, just wanted to start with some brief remarks on the quarter and our business and John will cover the financials and guidance.
Amit D.: We will turn the call over to the analysts for Q&A.
Amit D.: 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.
Amit D.: This strategy and planned industry and consumer trends.
Amit D.: Competitive practices, among our competitors and our response plan, including our antitrust lawsuit and expectations regarding profitability. These.
Amit D.: 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 are discussed in our SEC filings, including risks related to our antitrust lawsuit against Disney.
Amit D.: Fox and Warner Brothers discovery, and the potential impact of their proposed joint venture.
Amit D.: Except as otherwise noted the results and guidance. We are presenting today are on a continuing operations basis, excluding historical results of our former gaming segment, which are accounted for as discontinued operations.
Amit D.: During the call. We may also refer to certain non-GAAP financial measures.
Amit D.: Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are also available in our Q3 2024 earnings shareholder letter.
Amit D.: It is available on our website at IR Dot <unk> Dot TV.
Amit D.: Similar to last quarter, the company will not address any questions related to ongoing litigations during Q&A.
Speaker Change: With that I will turn the call over to David.
David Gambler: Thank you Amit good morning, and thank you all for joining us today to discuss <unk> third quarter 2024 results.
David: Our third quarter was marked by continued growth on the topline and notable improvement on the bottom line in North America, we exceeded revenue guidance closing the quarter with $377 million in total revenue up 21% year over year.
David: Subscriber growth was strong and we achieved our goal of 1.613 million paid subscribers up 9% year over year.
David: Our 2025 profitability target remains a priority I am pleased to report that we delivered a nearly $100 million year over year improvement in adjusted EBITDA over the trailing 12 months.
David: This includes a $33 8 million dollar improvement in Q3 2024 compared to Q3 2023.
David: We also posted meaningful year over year improvements for Q3 of 2024 and net loss adjusted earnings per share loss net cash used in operating activities and free cash flow John will provide more detail shortly.
David: Advertising revenue in North America declined 11% year over year due to a tough comp in Q3, 2023, as well as adjustments to our content portfolio.
David: Looking to Q4, we are encouraged by a record upfront season and in the coming weeks, we plan to add gamification, enabling brands to embed poles or theme trivia games into video without interrupting the live stream to a growing lineup of interactive ad offerings.
David: We continue to be encouraged by quickly maturing streaming market and our ability to deliver on consumer needs. Today. There are nearly 50 million households in the United States that still subscribe to receive pay TV a decline of more than 50% compared to the 105 million cable TV subscribers recorded in two.
Speaker Change: And Ted.
Speaker Change: Legacy customers turned to streaming nearly 30% has subscribed to virtual mvpds over the trailing 12 months. According to a recent market Nathan say report, it's clear that consumers are looking for an alternative to traditional legacy pay TV services.
Speaker Change: Media companies have been recently challenged by Big Tech competitors in our view licensing their programming to pay TV increasingly virtual is their most profitable path forward similar to the way we called out re bundling years ago, We believe that the industry will come to the same conclusion legacy business model economics can serve.
Speaker Change: <unk> and thrive simply by shifting focus to the virtual Mvpds space.
Speaker Change: We believe this shift to virtual mvpds is necessary to offset the decline of traditional pay TV and will also enable media companies to grow their revenue and profit. Therefore, we believe we are well positioned over the long term, despite some bumping and disruption in the short to medium term.
Speaker Change: As we continue to emphasize product quality and user experience, we believe consumers seeking a frictionless streaming product will increasingly choose bubo.
Speaker Change: We are also committed to offering consumers choice our mission to provide consumers with an aggregated content experience that let them choose the content. They want was further realized with our recent introduction of Standalone subscriptions.
Speaker Change: Now <unk> users can subscribe to select live and Vod content without purchasing the main through both product choosing the content that's right for them.
Speaker Change: With Standalone subscriptions are frugal free tier and of course, our signature sports first virtual mvpds, we seek to offer consumers multiple competitively priced options within the <unk> ecosystem free of friction.
Speaker Change: In August we won a preliminary injunction against the sports streaming joint venture from Disney Fox and Warner Brothers Discovery.
Speaker Change: In the ruling enjoining the Jv's launched the federal court granted our injunction because as it's stated quote <unk> is likely to succeed on its claims against the JV because it would quote substantially lessened competition and restrained trade. We are confident in the merits of our claims and believe that preliminary <unk>.
Junction will remain in place despite defendants pending appeal.
Speaker Change: Our fight against the JV is only our first step in helping create a fair streaming marketplace. Our goal is to rectify what we see as years long efforts from these vertically integrated media companies to systematically stifle and suppressed the growth of our sports streaming service. We believe these anti competitive practices.
Speaker Change: Have inflicted billions of dollars of damage on <unk>, we look forward to the opportunity to prove our claims when our antitrust suit as presented at trial in October of 2025.
Speaker Change: In closing the third quarter was highlighted by meaningful revenue and subscriber expansion balanced by cost controls critical to reaching our 2025 profitability target and we continue to fight for a fair streaming marketplace. As we believe competition will benefit the entire ecosystem I will now turn the.
Speaker Change: Call over to John <unk>, CFO to discuss our financial results in greater detail John.
John Anita: Thank you David and good morning, everyone.
John Anita: I am pleased with the results for the third quarter and even more so with the continued progress we have made across just about every metric and in relation to our profitability goals.
John Anita: These strong results build on our momentum from previous quarters, and further demonstrate that our initiatives and strategies are positively influencing our earnings potential and positioning <unk> to succeed in an ever changing operating environment.
John Anita: Taking a look at the results for the quarter, we continued to see healthy topline and subscriber growth with North America revenue growth of 21% and rest of royalty revenue growth up 6%.
John Anita: The main drivers behind the continued topline growth has been our ability to monetize retain and attract disk drivers.
John Anita: I am pleased to report North America subscriber growth of 9% ending the quarter with over $1, six 1 million and rest of our subscribers to over 378000.
John Anita: As has been evidenced in previous quarters, our commitment to enhancing efficiency, while simultaneously expanding our market presence is not solely reflected in our robust revenue and subscriber growth it.
John Anita: It is also having a positive impact on our profitability metrics.
John Anita: In Q3, net loss was $54 $7 million.
John Anita: A marked improvement compared to a net loss of $84 4 million in Q3 2023.
John Anita: This led to a per share loss of <unk> 17.
John Anita: A significant improvement compared to a loss of <unk> 29 and.
John Anita: In the third quarter of 2023.
John Anita: Adjusted EBITDA loss was $27 $6 million.
John Anita: Compared favorably to a loss of $61 4 million in the third quarter of 2023.
John Anita: Adjusted EPS loss was <unk> <unk>, an improvement compared to an adjusted EPS loss of 22.
John Anita: In Q3 2023.
John Anita: In summary, our financial results continue to showcase the substantial progress, we're making across the business.
John Anita: We believe the company's current trajectory reflects both its potential and resilience, placing us in a strong position to reach our profitability goals.
John Anita: Moving to the balance sheet and cash flow, we ended the quarter with $152 $3 million of cash cash equivalents and restricted cash.
John Anita: In addition, our ongoing efforts to identify efficiencies and maximize leverage across the business resulted in a $31 million improvement in free cash flow with just over $1 million shy of achieving positive free cash flow for the quarter.
John Anita: This reflects our ongoing commitment to maintaining rigor and discipline in managing our company wide cost and we are pleased with the progress we've made this quarter.
John Anita: Turning now to guidance, our fourth quarter North America subscriber guidance is 1.665 million to one 705 million subscribers, representing 4% year over year growth at the midpoint.
John Anita: While our fourth quarter revenue guidance projects $426 million to $446 million.
John Anita: Representing 9% year over year growth at the midpoint.
John Anita: On a full year basis, our guidance for 2024, North American subscribers is now for between 166 5 million to 1.7 hundred 5 million subscribers, representing 4% year over year growth at the midpoint.
John Anita: And for full year 2020 for North America revenue, our guidance is for 1.58 billion to $1 $600 billion Rep.
John Anita: Representing 19% year over year growth at the midpoint.
John Anita: And for rest of World, We expect 345000.
John Anita: To 355000 subscribers in the fourth quarter, representing a 14% year over year decline at the midpoint while.
John Anita: While our revenue guidance projects 8 million to $9 million representing.
John Anita: Representing zero percent year over year growth at the midpoint for the quarter.
John Anita: This leaves the guidance of 345 to.
John Anita: 355000 subscribers for the full year 2024, representing a 14% year over year decline at the midpoint and full year 2020 for revenue guidance of 33 million to $35 million, representing 4% year over year growth at the midpoint.
John Anita: This guidance reflects our current expected exposure to potential industry volatility and our commitment to maintaining discipline and subscriber acquisition costs relative to monetization.
John Anita: In closing I am pleased with our results.
Even in a challenging market, we have posted strong revenue and subscriber growth.
John Anita: We have stayed true to our principles and thoughtfully evolved our strategy to better leverage our resources.
While we recognize there is still much work can be done to capture the vast opportunities we see in front of us.
John Anita: We remain completely committed to our business and our partners.
John Anita: We believe our culture focused on innovation and relentless execution continues to enhance our capabilities operational muscle and execution discipline driving forward, our action plan and making progress against our profitability goals.
Speaker Change: I would now like to turn the call over to the operator for Q&A.
Speaker Change: Operator.
Speaker Change: We will now begin the question and answer session. If you have dialed in and we would like to ask a question. Please press star one on your telephone keypad ratio hand, and trying to queue.
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Speaker Change: Our first question comes from the line of Laura Martin with Needham Your line is open.
Laura Martin: Hi, there good numbers you guys. Congratulations I have two for David one is.
Laura Martin: David I would love it if you would explain to me why blue both free, especially now that you have and now you've added the pay channels why that isn't available to everybody and why it's only available to lower churn to prior and current service subscribers I don't understand why that's better economics for you.
Speaker Change: Then Mike just one is.
Speaker Change: Made the point do you think in your prepared remarks that.
We now have cable subscribers of 50 million and I think you said, 30% sort of subscribe to virtual Mvpds. My question is.
Speaker Change: Do you think that the virtual mvpds tier is actually a long term.
Speaker Change: Structural business because eventually cable subscribers are going to go to zero.
Speaker Change: And its sports moves to streamers, why isn't as anybody should be a virtual mvpds subscriber.
Speaker Change: My two questions. Thanks.
Speaker Change: Thank you Laura.
So just on your first question I think it's a very good question.
Speaker Change: It's something that we.
Speaker Change: I thought long and hard about I think what we attempted to do is one because it's a new product we wanted to make sure that we.
Speaker Change: We are able to manage the free tier as best as we can and sort of learned a little bit more.
Speaker Change: About what consumers are.
Speaker Change: We're looking for and what their behaviors are the concern that was putting it in front of the paywall is we didn't want that to impact.
Speaker Change: The funnel.
Speaker Change: Because people are basically are coming and just move out today for sports programming.
So by putting that free tier in front immediately we just didn't want to have an impact.
Speaker Change: Conversion rates, which obviously would drive up our subscriber acquisition costs as just sort of one potential.
Speaker Change: Potential outcomes, so as we get better on managing and retaining customers and bringing them back.
Speaker Change: Into the ecosystem, we want to maintain them in the ecosystem. So.
Speaker Change: Right now we've been focused on.
Speaker Change: Creating features like Upselling customers that are on that for each year, but I think eventually you're correct, we will put that free tier.
Speaker Change: <unk>.
Speaker Change: The virtual Mvpds paywall.
Speaker Change: Jonathan do you have anything to add to that.
Speaker Change: No it's nothing that Deutsche Bank.
Speaker Change: Yes, and then Laura on your second question look I think what we've attempted to.
Communicate to the street is that we're very focused on offering consumers a plethora of services.
Speaker Change: And our goal is really to engage.
Speaker Change: <unk> engaged consumers across.
Speaker Change: The demand for so.
Speaker Change: We think that the virtual MEP product is a solid product I think as I'm sure you know lots of people.
Speaker Change: Are complaining about the number of services that they've subscribed to the inability to find anything.
Speaker Change: But again there are people that will really enjoy.
Speaker Change: Package that has everything even if they don't watch a lot of the channels. They want to make sure I'll give you. An example, like for instance.
Speaker Change: Watch the weather channel.
Speaker Change: And there is a.
Speaker Change: Climate event.
Speaker Change: The region that you care about our EMEA a family.
You want to make sure that that channels available to you. So you don't have to scramble for it. So again I think it's just a matter of making sure that we offer a wide range of products that are flexible and offer people solutions that theyre looking for.
Speaker Change: Our next question comes from the line of Alicia Reese with Wedbush. Your line is open.
Speaker Change: Okay.
Alicia Reese: Hey, guys. Good morning, I'm, just looking at the.
Alicia Reese: Just wondering if you could talk a little bit more about the dynamics in the quarter.
Alicia Reese: With regard specifically to political advertising.
Speaker Change: Felicia I Couldnt quite hear the first part of the question was it specific to ads.
Speaker Change: Yes, Im just wondering if you could talk about the dynamics.
Speaker Change: Crude in the quarter with regard to add <unk> political advertising and what was driving.
Speaker Change: <unk>.
Speaker Change: My political didn't perhaps push it a little higher.
Speaker Change: Sure Okay, Yes, sure I'll take that one.
Speaker Change: On the political front, what Ive said I think now for the past couple of quarters was that I think like others, we expect that and expect it to have a record political year.
Speaker Change: Which we did and so I think we're more or less came on top of our budget for the year, which is somewhere call. It in the mid single digit millions.
Speaker Change: That was up call it around 20% or so from last year.
Speaker Change: In terms of.
Speaker Change: The <unk> <unk>.
Speaker Change: From a third quarter perspective, it's not as significant as a percentage I would say what broadcast or what happened. So the the inflationary impact. If you will in <unk> is somewhat more limited, but I'd say that the biggest impact in terms of the <unk>.
Speaker Change: The drop of the <unk>.
Speaker Change: Discovery Scripps content earlier in the year.
Speaker Change: And that is in terms of that.
Speaker Change: I think I would say in terms of that was that in.
At <unk>, we expect improvement sequentially and.
And on a year over year basis in terms of that Apple.
Speaker Change: Thank you. Our next question comes from the line of Darrin Asahi EBIT Ross Your line is open.
Speaker Change: Hey.
Speaker Change: Two questions. If I may just following up on the <unk> commentary.
Speaker Change: <unk> John Mike is there anything beyond discovery, that's a headwind it isn't making this business grow faster than it is that's my first question and then as it pertains to your Standalone premium packages relative to the virtual Mvpds can you just speak to kind of the relative profitability of the products.
Speaker Change: Thoughts on any potential cannibalization.
Speaker Change: Yes sure alright.
Speaker Change: The third quarter ads, let me kind of take a step back a little bit.
Speaker Change: And so look we had a year over year decline in terms of the reported number I would say there are a couple of things to think about it look I think that I'm very pleased in general in terms of what the team is doing.
Speaker Change: The first point is that we didn't have the discovery Scripps content following a drop during the second quarter, whereas we had them in the third quarter of last year. It's Rob So that was a headwind on the second point I think I may have referenced this on our call last quarter, we were up against a 34% comp to last year. So if we take a step back our two year.
Speaker Change: Stock comp.
Speaker Change: Was call it somewhere in that seven to.
Speaker Change: 700% range, plus or minus for the first.
Speaker Change: And second quarters.
Speaker Change: And even with what we did in the third quarter, we had an acceleration that to your comp.
Speaker Change: It was 11%.
I'd say again.
Speaker Change: Do you want to grow.
Speaker Change: I'd say from a two year basis, we're pretty happy with the growth there and again in terms of fourth quarter not that you asked that directly but I would say, we expect to see improvement.
Speaker Change: And we're seeing signs of improvement.
Speaker Change: <unk> from <unk> relative to imports relative to <unk>.
Speaker Change: In terms of your question around.
Speaker Change: The offering is what I would tell you is that we announced this I think a few weeks ago around some more premium offerings.
Speaker Change: What I can tell you there is that.
Speaker Change: They will be accretive as it relates to margin dollars I think in many cases there'll be actually.
Speaker Change: Similar in terms of overall margin and so I don't know if you got any kind of degradation as it relates to the margin of the business. In fact, I think over time that'll be overall improve our margin dollars.
Ladies and gentlemen that concludes the question and answer session.
Speaker Change: You all for joining you may now disconnect.
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