FuboTV Inc. Q1 FY2025 Earnings Call

Hello, and thank you for standing by. My name is Tiffany, and I’ll be your conference operator today. At this time, I would like to welcome everyone to the Fubo First Quarter 2025 Earnings Conference Call. All lines have been placed on mute to prevent any background noise. After the speakers’ remarks, there will be a question-and-answer session. I’d now like to turn the call over to Ameet Padte, Senior Vice President of FP&A, Corporate Development and Investor Relations for Fubo. Please go ahead.

Thank you for joining us to discuss Fubo’s first quarter 2025 results. With me today is David Gandler, Co-Founder and CEO of Fubo; and John Janedis, CFO of Fubo. 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. Before we begin, let me quickly review the format of today’s call. David will start with some brief remarks on the quarter and our business, and John will cover the financials and guidance; then, we will turn the call over to the analysts for Q&A. I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities laws, including but not limited to statements regarding our financial condition, anticipated financial performance, business strategy and plans including our pending business combination and our product and subscription packages, market, industry and consumer trends, and expectations regarding growth and profitability. 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. 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 may also refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are also available in our Q1 2025 earnings shareholder letter. Please note as well that during Q&A, the company will not provide any information related to the pending business combination with Hulu + Live TV and ongoing regulatory matters beyond what we have already shared. With that, I will turn the call over to David.

Thank you, Ameet, and good morning, everyone. Thank you all for joining us today to discuss Fubo's first quarter 2025 results. In the first quarter, our global streaming business exceeded our subscriber forecast and achieved our revenue guidance. We are pleased with these results, which came against a typically lighter first quarter sports calendar and a broader backdrop of economic uncertainty. Looking at our North American streaming business. We delivered 1.47 million paid subscribers, down 2.7% year-over-year, but exceeding our Q1 guidance of $1.46 million at the high point. Total revenue in the region was $407.9 million, and that was up 3.5% year-over-year. Notably, we once again improved our global profitability metrics by more than $100 million for the trailing 12 months. These results demonstrate our team's ongoing execution as we focus on profitability in 2025 for our global streaming business. We remain excited about our agreement with the Walt Disney Company to combine Fubo with Hulu + Live TV and the potential to increase competition and consumer choice in the pay TV space. We continue to work through the regulatory process and look forward to sharing more information when we are able. The streaming landscape continues to evolve and grow more fragmented, further demonstrating the importance and relevance of Fubo's aggregation model. We remain committed to providing customers multiple and flexible packaging options from skinny bundles to the full virtual pay TV bundle and everything in between. In recent months, we've seen the industry follow our lead and introduce skinny year content bundles. We are gratified by this because we believe a streaming landscape with multiple options benefits all consumers. We continue to focus on meeting consumer needs at every point along the demand curve. As we have previously communicated, our skinny bundle offering will include a sports and broadcasting service. In addition to featuring content from the Walt Disney Company, we are working hard to secure content from non-Disney programmers for the new service. It is critical for Fubo subscribers that we are able to negotiate content licensing agreements at their rates and terms. Our goal remains to launch this service for the fall sports season. In closing, we continue to focus on consumers and what they expect from a streaming service, namely premium content and innovative product experience, value and above all choice. At the same time, our priority is providing value for our shareholders, and we remain focused on achieving profitability in our streaming business this year. We look forward to keeping you updated on our progress. I will now turn the call over to John Janedis, CFO to discuss our financial results in greater detail.

Thank you, David, and good morning, everyone. Our performance during the first quarter validates our strategy to optimize our aggregated content platform even amidst changes in the media landscape and a potentially cautious consumer outlook. We achieved North America revenue growth of 3.5% and within our guidance range, and our North America subscriber count of 1.47 million was ahead of expectations. From an advertising revenue standpoint, ad revenue for the quarter was $22.5 million down 17% year-over-year, largely due to the discontinuation of Warner Bros. Discovery and TelevisaUnivision Networks. Excluding these impacts, our underlying performance improved year-over-year. Net income from continuing operations was $188 million, or $0.55 per diluted share compared to a net loss of $56.3 million and a loss per share of $0.19 in the prior year period. It is important to note that net income includes the $220 million gain on settlement of litigation. Adjusted EPS loss improved to $0.02 and a marked improvement compared to a loss of $0.14 a year ago, as we made meaningful progress reducing non-operating expenses and narrowing adjusted losses. Adjusted EBITDA was negative $1.4 million, a $37 million improvement year-over-year, highlighting our ongoing focus on cost control, efficient growth and driving leverage in the model. Turning to cash flow. Net cash provided by operating activities was $161 million, reflecting the $220 million impact of the gain on settlement of litigation. Free cash flow improved by $9 million year-over-year to negative $62 million, as we remain disciplined in our capital allocation and working capital management. On a trailing 12 month basis, we improved both adjusted EBITDA and free cash flow by more than $100 million, underscoring the effectiveness of our profitability initiatives and operating efficiency. Looking ahead, our North America guidance for 2Q 2025 calls for subscribers of $1.225 million to $1.255 million, or a 14% year-over-year decline at the midpoint and revenue of $340 million to $350 million, a 10% decline at the midpoint. Note that this guidance includes the continued impact of our recent drop of TelevisaUnivision content and reflects the benefit of one-time sports events in 2Q 2024. For Rest of World, our Q2 guidance projects subscribers of 325,000 to 335,000, down 17% year-over-year and revenue of $6.5 million to $7.5 million, reflecting a 15% decline at the midpoint. In closing, for several years, we've been driving important investments in Fubo's technology and they made strategic content changes resulting in significantly improved profitability and cash flow under challenging circumstances. Looking ahead, we are energized by what we believe we can achieve through added scale with our pending transaction with Hulu + Live TV. In the meantime, we remain firmly focused on achieving profitability in 2025, alongside executing on our long-term strategic priorities.

Your first question comes from the line of Dave Joyce with Seaport Research Partners. Please go ahead.

Thank you. Could you provide some additional details about the content front? TelevisaUnivision mentioned on their earnings call that they would be interested in discussions with you again. Is there any update you can share regarding that? Additionally, how are you doing with realigning your programming contracts for slimmer packages in time for the football season? Thank you.

Hey, David. This is John. I'll take the first one, and maybe David will talk to the skinny package progression. Look, on TelevisaUnivision, I would say, no update to share, but as you know, there's some content we've dropped in the past that we brought back. Consistent with what we said last quarter, I think we're certainly open to those discussions with acceptable terms and that's important. But in the interim, we've lowered the price on our Latino package. We're seeing solid interest and we're always looking to improve our offerings to our customers. But I'd also say, as we mentioned, the impact will continue into the second quarter. We're now about 4.5 months since the drop. But as the time goes on, the impact on our subscriber base will be more modest.

Yes. And this is David. As to the second part of your question, look, we are very focused on releasing skinny bundles. We've stated this many times. We started offering some standalone services. Early indications, really I think, create a situation for us where we feel very comfortable that there's probably a growth opportunity headed into the fall. So, we're very focused on completing our content deals with non-Disney partners. But of course, we've made it very clear that it has to be on acceptable terms at a fair market price with the same flexibility as other distributors. So, that will be our focus in the short-term, and we look forward to providing you more information as we move forward on that front.

Your next question comes from Clark Lampen with BTIG. Please go ahead.

Thank you. Good morning. For David or John, I'll sort of ask the obligatory macro question, and curious, if you guys have seen any impact 2Q to date or whether maybe you expect as a result of some lag effect impact, any impact on your gross additions churn or on the ad side of your business demand in the U.S.? And then for 2Q, John, I don't know if it's possible to quantify or give us a sort of even directional sense for what 2Q growth would have looked like had you not had the Copa America and Televisa impact that might be challenging to quantify, but would just be curious, I guess, if you have a sense for what like-for-like performance across the U.S. is looking like right now? Thank you.

Yeah. Sure. I'll take those, Clark. So maybe I'll start with the second question first. Look, on 2Q to your question, we have ongoing churn in the Latino package, as we referenced and then to your point, we had Copa last year. If I were to kind of clean it up and calculate the same-store, I would say, on a same-store basis, our subscriber growth looks to be relatively flat. On the macro side, what I would say is, look, short answer is nothing stands out in terms of tone from both our customers and our advertising partners. I'd say on the customer side to your question, I think overall churn for our English package is relatively in line or actually slightly better on a year-over-year basis even with the price increase. I would say also that reactivations were better than we expected for the month of April, which I think is relevant given the timing of some of the macro headlines out there. And then on the advertising side, I would say, in terms of modeling, we lapped the Discovery Scripts drop as of the end of April. And so, we'll see more of a normalization of our advertising business starting now.

Your next question comes from Laura Martin of Needham. Please go ahead.

Good morning. David, I wanted to ask about the Rest of World segment. We've seen a decline of 11% in subscriber numbers over the last six months, with both ARPU and revenues also down. I recall this was a critical area for us, but is the business undergoing a structural shrink? How are you planning to approach the Rest of World? Also, could you tell me about Gen AI? What initiatives are you pursuing with Gen AI, especially in creative or advertising? John, I noticed ad revenue has dropped by 17%, which is disappointing. I'm unsure why it matters if we lose certain networks. Don't you have enough networks? How could losing two major content providers lead to a 17% year-over-year drop in ad revenue? Thanks, everyone.

Okay. Yeah, Laura. I'll take that first question. There's a lot in there. On the Molotov side, I think we've said this many times, it's really about team technology and the synergies that we see with that business. As we've stated now since 2022, despite all of the challenges that we've seen over this period of time from larger companies like Netflix and others, our goal has always been profitability over growth. Molotov, like Fubo, we've set that same expectation, and they have to get to profitability. And we feel comfortable that they will get there. And then on the other side of that coin is the fact that we are focused on building out our unified platform, we feel very good about where the platform is today. Fubo itself is now on that platform. We are now onboarding Molotov and in terms of subscriber growth, it's a relatively straightforward formula. You have to invest in marketing. We’ve stated that investing in marketing is an upfront cost that has short-term cost implications, and so that has not been on the forefront for us. But yes, international is an important piece to the long-term trajectory of this business. We see what YouTube has been able to accomplish on a global basis and where the majority of viewership and revenues are coming from internationally. We see the same trend with Netflix. We're getting everything ready to expand at the right moment. And so, this will be a testing ground as it has been, and we're almost there. John, would you like to take the rest of this?

Sure. I would just like to add to David's comment that despite the decline in subscribers, our team achieved EBITDA that exceeded our budget expectations. Profitability continues to be our main priority. Regarding your question about ads, it’s important to remember that we have ad insertion capabilities for those networks. For example, both Univision and Discovery Networks are experiencing a reduction in ad insertable hours, which has a direct effect on revenue. If we were to adjust for that, I believe Q1 revenue would have shown year-over-year growth. Additionally, it appears that Q2 is on track to perform slightly better than Q1.

Your final question comes from Alicia Reese of Wedbush. Please go ahead.

Hey, guys. Thanks for taking my question. I have a few as well. On the ad spend, I was wondering if you could dig in a little bit on how your gamified ads are tracking and how you can get more advertiser interest, while the budgets are tightening with features such as that. If it's gotten much traction so far, we had heard in the quarter that it has. Could you just double click on that, I'd appreciate it.

Yeah. Sure. Hey, Alicia. This is John. I’ll take it. Look, I’d actually broaden it out from gamified to what I would just call interactive ads. Over the past couple of quarters, you’ve seen us launching various new formats that I would just label as interactive, gamified, etc. We’ll also be launching shoppable. If I take it as a larger bucket, I would say that we’re really starting to see some good traction. Our interactive ads are up 30% or 37% year-over-year. I’d say that interest is actually accelerating. Our ad products overall are up 41% year-over-year for the first half. So, we’re seeing acceleration. I would say, candidly, the sales cycle was a little longer than we would have expected initially. But I’d say that we’re pleased with what we’re seeing. And then in terms of advertiser interest as budgets potentially shrink. We need to innovate. Our ad sales team was with us at a conference earlier in the week, and we had very strong interest from a variety of parties, including the holding companies about a new ad format that we just brought to market. I expect that I’ll start talking about that on our next quarter’s call. But we feel positive about what we’re observing from our ads.

There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.