FuboTV Inc. Q2 FY2025 Earnings Call

Thank you for your patience. My name is Kate, and I will be your conference operator today. I would like to welcome everyone to Fubo's second quarter 2025 earnings call. I will now turn the call over to Ameet Padte, Senior Vice President of Financial Planning and Analysis, Corporate Development, and Investor Relations. Please proceed.

Thank you for joining us to discuss Fubo's second 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 at ir.fubo.tv. 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. 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 products 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 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 Q2 2025 earnings shareholder letter, which is available on our website at ir.fubo.tv. 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. We appreciate you joining us today to discuss Fubo's second quarter 2025 results. We are pleased to report that the second quarter represented Fubo's first quarter of positive adjusted EBITDA, an important milestone for our business. This achievement is the result of Fubo's focused execution, our ability to deliver on consumer needs, and our commitment to value and relevance despite a fragmented and friction-filled streaming marketplace. Our global streaming business exceeded both revenue and subscriber expectations in the second quarter. In North America, we delivered total revenue of $371 million, down 3% year-over-year and 1,356,000 paid subscribers, down 6.5% year-over-year. In the Rest of World, we closed the quarter with total revenue of $8.7 million, up 4.7% year-over-year and 349,000 paid subscribers, down 12.5% year-over-year. We have filed a preliminary proxy statement seeking shareholder approval of our agreement with the Walt Disney Company to combine Fubo with Hulu+ Live TV. As previously stated, we continue to be excited about the potential to increase competition and consumer choice in the pay-TV space. The anticipated timeline to close this transaction is currently the fourth quarter of calendar year 2025 or the first quarter of calendar year 2026. Closing remains subject to regulatory approvals, Fubo shareholder approval, and the satisfaction of other customary closing conditions. Fubo has a demonstrated history of fighting for consumer choice, and we continue to focus on super serving customers with flexible content options at appropriate price points. In the coming weeks, we will launch Fubo Sports, a skinny content service for sports fans. We look forward to sharing more details soon. Fubo's recent launch of pay-per-view further underscores our commitment to offering flexible content experiences. This new feature allows both subscribers and nonsubscribers to purchase access to premium live events, including boxing, wrestling, and soccer on a one-off basis. By opening the door to a broader audience, Pay-Per-View not only expands Fubo's reach but also creates a strategic pathway to convert casual viewers into monthly subscribers. Our strategy to introduce the Fubo experience to new audiences is exemplified by our recent content partnership with DAZN in the U.S. Through this collaboration, Fubo Sports Network, our free ad-supported streaming TV channel, has expanded its distribution to DAZN's platform, increasing visibility and reach. In turn, Fubo subscribers now enjoy access to a premium content package that includes the DAZN1 channel, featuring select exclusive sports rights. Notably, Fubo was first to market with this offering, reinforcing our leadership in sports streaming. At Fubo, we believe premium content must stand alongside product quality and user experience. Our recent launches of personalized features like Catch Up To Live, Game Highlights, and Timeline Markers optimize the live sports viewing experience on Fubo and complement our strategy of delivering the moments that matter, such as scoring plays in addition to full game access. These and other engaging features enable our customers to consume content the way they choose and have driven a steady lift in time spent on Fubo. In closing, the second quarter was a milestone for Fubo marked by our first-ever quarter of positive adjusted EBITDA. We continue to focus on delivering a premium sports streaming experience at scale with flexibility and choice for every consumer. 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. John?

Thank you, David. Our second quarter financial results reflect continued execution against our strategic priorities and profitability goals. Our performance once again demonstrates the value of our aggregated content model and technology-driven platform. As disclosed last week in the announcement of our preliminary second quarter 2025 results, the company meaningfully exceeded revenue and subscriber guidance. We delivered North America revenue of $371 million and North America paid subscribers of 1.36 million, and we are pleased with our ability to deliver outperformance in the second quarter versus expectations. Ad revenue in North America totaled $25.5 million, a 2% year-over-year decline, primarily due to the loss of certain ad-insertable content from Warner Bros. Discovery and TelevisaUnivision. Turning to Rest of World. Revenue was $8.7 million, and our subscriber count was 349,000 with both metrics also exceeding guidance. Net loss narrowed to $8 million or $0.02 per share compared to a loss of $25.8 million or $0.08 per share a year ago. We are also extremely pleased to report second quarter adjusted EBITDA of $20.7 million, an improvement of more than $30 million year-over-year. As David mentioned, this marks a major milestone as our first-ever quarter of positive adjusted EBITDA. This underscores our ongoing focus on driving operating leverage in the model to best position the company for long-term growth. Net cash used in operating activities in the quarter was $34.6 million and free cash flow declined by $2.4 million year-over-year to negative $37.7 million. We ended the quarter with over $285 million in cash, cash equivalents, and restricted cash, providing ample financial flexibility. In closing, I want to emphasize how proud we are of this quarter's performance and the momentum we've sustained. We are energized by what we believe we can achieve through our pending business combination with Hulu + Live TV and look forward to updating you on our progress. With that, I'll turn it over to the operator for Q&A.

Congrats on the EBITDA profitability. Just in terms of the third quarter, can you maybe just talk about some of the puts and takes and how we should formulate subscriber expectations for the quarter, just with the launch of products from competitors and near expected launch of a skinnier product? And with the competitive environment, how should we think about the marketing efforts both to support your service relative to the traditional seasonal pattern?

Sure. Pat, maybe I'll start. This is John, and I think maybe David will jump in, too. But let me just start on July. Look, that finished in line in terms of the month with what we expected in terms of subscribers. What I would tell you, though, with the fall sports season starting soon, we would expect to see the typical seasonal uptick alongside reactivations. In terms of puts and takes, we're mindful that the market is competitive. So the team spends a lot of time looking at SAC conversion and churn. David, I'm not sure you have much to add on that.

Yes. I would say, as you said on July, I think July, we're seeing some, I would say, relatively strong retention as it relates to our core English product. And because we've been so focused on more effective and efficient marketing, we believe that will lead to greater retention from this particular cohort going into the football season. And we're going to continue to maintain an effective and efficient approach to marketing in the third quarter because we do feel that there is that tailwind that we typically see in the season.

David, I would like to discuss the French acquisition. The industrial logic was not only that they had excellent technology but also a strong free streaming service, and there's an intention to incorporate some of that expertise into Fubo to provide free offerings. Can you give us an update on the French assets? Did the acquisition achieve its intended goals? It seems like there hasn't been much done with free services in front of the paywall. Can you clarify whether the strategy was successful, and if not, why? If it was successful, how so?

Yes. Thank you, Laura. I think there were a few pieces to that acquisition that we talked about. One was our CTO, our current CTO led the Molotov streaming platform. So we've integrated the technology teams. We've been very focused on unifying our technology stack, which will give us a significant edge as we look to continue to drive value across the Rest of World. I know we've been very focused on France. But at the same time, as you know, we've been really focused on achieving our profitability targets. That has been the priority. But I will say in France that we're in the midst of discussing French property sports properties, in particular. I still want to talk about the ones that we're in the process of negotiating, but we believe that there will be some significant sports rights that will likely come online in the coming few weeks. So we are very focused on that. I do believe that there's a significant opportunity there. The technology stack is now capable of handling multiple services that we develop. So I'm very bullish on that. The other thing is we haven't really provided Molotov with a lot of the ad technology that we've been developing over the last couple of years. And all of that, we believe, will become available to Molotov sometime in either the end of fourth quarter or certainly around the first quarter of 2026.

Interesting, David. I believe Disney has made a significant decision by collapsing their streaming services into the new ESPN flagship service, ESPN+, which will cost $30 and include free Disney+ and Hulu. My question for you is, if you had unrestricted access to all sports, independent of Fubo's pass, and could integrate your technological ambitions into the consumer experience, what would you envision as the ideal upgraded consumer experience compared to what's currently available in the market to provide your offering with a competitive edge?

Yes, I believe we have been very focused on two main objectives. First, we want to create a highly aggregated service that allows us to sell stand-alone offerings comfortably, which we have begun to implement, along with a broader sports offering that includes both the service and bundle options. This remains our direction. We have observed a positive increase in the stand-alone offers. It's clear that consumers are prioritizing spending less rather than more, which is reflected in the data, especially among Latino audiences and our stand-alone sort bundles. However, there is still a significant opportunity due to the fragmentation and confusion consumers face in the market. We have introduced authentication for ESPN+ as of today, and emails will be sent out in the coming days. I believe that a more comprehensive package will attract many individuals, as a lot of people do not want to search for programming and are uncertain about where to find it. The market is changing rapidly, and we have been both proactive and reactive in our approach to stay ahead of consumer needs. Overall, there seems to be a demand for broader packages in the market, and as always, our goal is to provide value to consumers at various price points. This will remain our focus. Regarding ESPN, it seems that everyone is striving for the right strategy, and this serves as another example of a company looking to utilize all its assets to enhance the price-to-value equation for consumers in a highly competitive landscape.

Congratulations on the positive EBITDA you printed in the quarter. So if I could, I'd like to start by asking about the ad trends in the quarter. Obviously, you had some nice uptick in the ad ARPU year-over-year. So that was really nice to see. I'm wondering if you've seen a slowdown in the ad bookings related perhaps to the tariff pressure on consumer brands. And if by what you surmised the Fubo Sports Network FAST channel is working to offset those trends, if that's the piece that's offsetting it or if there are other factors, if you could highlight those?

Alicia, this is John. There are a few points to cover, so let me know if I missed anything. To start with the advertising, I mentioned last quarter that we were noticing softness in the auto sector, particularly with foreign autos. That trend has persisted, but I wouldn't describe the overall decline in revenue as significant. It seems to be maybe a drag of about 1 percentage point on the total portfolio growth. Other than auto, there aren't any notable issues related to tariffs. Regarding the third quarter, it’s too early to make a definitive call. July is our smallest month of the quarter, and we don’t have a clear picture of back-to-school yet. With the sports calendar starting later this month, I expect to have a better understanding of the quarter by mid to late August. One last thing I’d also add, sorry, go ahead.

I was just wondering if you could highlight at least qualitatively how the FAST channel is contributing.

Yes, sure. On the FAST channels, I think what David and I have said in the past is that in terms of the totality of it, the dollars are in the mid- to high singles and the growth is in the strong doubles. And so over time, that number has grown, meaning as a percentage of the total. So now FAST channels are, call it, high single digits, approaching low doubles and still growing strong double digits. And so a modest positive tailwind, if you will, to the overall ad growth.

In absence of guidance this quarter, I was just kind of hoping to get your thinking around the directional trend for EBITDA from here. If we strip out some of the one-time costs that were in the quarter, we still land at a pretty good number. So I was just curious if this is maybe the new normal in terms of EBITDA profitability or if there are some seasonal fluctuations that we should keep in mind looking forward?

Yes, sure. I'll take that. This is John. Look, I would say that, as you know, our business has been and remains seasonal. Historically speaking, 2Q has been our strongest adjusted EBITDA quarter of the year. And then in the back half of the year, while we grow our subs sequentially meaningfully typically, there's also marketing costs associated with that. And so I would say that the normal seasonal trends as it relates to profitability directionally should continue.

I have a question for David or John regarding the original sub guide for Q2 and the revised sub guide from a couple of weeks ago. What were the main factors affecting those changes? Additionally, regarding the broad relationships that you have ended in the last several quarters, what is the current status of those, such as with Univision? How do you see that progressing on an annual basis?

This is John. Maybe I'll start with the sub guide. And so look, to your point, we guide more or less to where we're forecasted in terms of pacing. And so we came in, call it, 100,000 or so ahead relative to the original guide. I would say it was a couple of things there. One was that we continue to see strong interest in the Latino product given the price reduction there post the Univision drop. And then we've also seen better retention trends in terms of churn across the portfolio for the quarter.

Yes. As John mentioned, we have faced a challenging year, but I believe we have performed exceptionally well given the number of content channels and partners that have exited since June of last year, including Warner Bros. Discovery and Univision. It's clear that consumers are very price sensitive right now and are seeking significant value. Although we weren't able to finalize a deal with Univision, we've seen a notable increase in conversions for our Latino packages, which John referred to earlier. We believe that these deals will eventually resolve favorably. Currently, we're in a strong position and have managed to stabilize our advertising business despite the loss of several advertising-enabled channels. We are also developing stand-alone offers and are focused on our skinny sports service, Fubo Sports. We're aiming for a good price-value balance, and I believe that with the upcoming changes in traditional media companies, we are keeping our options flexible. Overall, we think these situations will sort themselves out in time.

Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.