FuboTV Inc. Q3 FY2025 Earnings Call

Thank you for joining us for the fubo Third Quarter 2025 Earnings Conference Call. I would now like to hand the call over to Ameet Padte, Senior Vice President of Financial Planning and Analysis, Corporate Development, and Investor Relations. Please go ahead.

Thank you for joining us to discuss fubo's Third 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, expected synergies and other benefits from our business combination, business strategy and plans, including 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. Actual results could differ materially from our current expectations, and we may not provide updates unless legally required. Potential factors that could cause actual results to differ materially from forward-looking statements are discussed in the earnings release we issued today, our letter to shareholders and in our SEC filings, all of which are available on our website at ir.fubo.tv. 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. Please note also these results reflect fubo's stand-alone operations prior to the recent completion of our business combination with the Walt Disney Company's Hulu+ Live TV. 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 available in our Q3 2025 letter to shareholders, which is available on our website at ir.fubo.tv. With that, I will turn the call over to David.

Thank you, Ameet, and good morning, everyone. This quarterly earnings call is unlike any other in our history, coming just days after completing our transformative combination with the Hulu + Live TV business, setting a new stage for what's ahead. The combination of fubo and Hulu + Live TV forms one of the largest live TV streaming services in America. Our combined nearly 6 million subscribers in North America make fubo the sixth largest pay TV company according to recent UBS Estimates. It's a defining moment for our team and our shareholders and the culmination of years of innovation and execution. Together with our strong stand-alone results, this combination underscores the enormous potential ahead, a consumer-first platform built on choice, value and profitable scale. Now looking at our third quarter stand-alone results, fubo ended the quarter with 1,630,000 paid subscribers in North America, our strongest third quarter performance to date and $369 million in total revenue alongside solid contributions from our international operations. We're also proud to report that we achieved meaningful improvements in both net loss and adjusted EBITDA with the third quarter representing our second consecutive quarter of positive adjusted EBITDA. Beneath those strong headline numbers, the health of our underlying metrics continues to improve. Trial starts increased and conversions from trial to paid meaningfully improved year-over-year, while churn declined nearly 50% versus last year. At the same time, we reduced marketing spend during a highly competitive sports quarter, reinforcing our path toward profitability and stronger margin expansion. These trends reflect growing consumer demand, higher engagement and the continued scalability of our model. Our mission remains clear: deliver must-have programming through a flexible value-forward experience. fubo continues to make watching live content easier and more valuable. The fubo channel store, similar in concept to Amazon Prime video channels, offers third-party premium services like RSNs, DAZN 1, Hallmark Movies Now and Paramount+ with SHOWTIME into one sports-first interface, removing friction and simplifying viewing. Our fubo Sports skinny service added lower-priced, high-value access to top sports content, including the majority of ESPN unlimited content and is driving record trial conversions. Together with the expansion of pay-per-view, which delivered double-digit sales growth in October compared to the prior month, these initiatives demonstrate fubo's ability to innovate, scale engagement and strengthen our live platform. We have built market-defining features, multiview, game highlights, game alert push notifications and catch up to live that increase engagement and make watching sports easier and more entertaining. These are the types of personalized capabilities we will continue to scale across our growing membership base. Fubo's recent results give us much to be confident about, and we envision unprecedented opportunities at the combined company. We're expanding choice, not forcing one bundle. The combined company offers consumers a broad set of sports and entertainment-focused programming offerings from fubo and Hulu+ Live TV, respectively. Together, we give families flexible ways to rightsize their spend while broadening access to the best content. In the near term, we'll focus on programming efficiencies, ad tech uplift and marketing at scale, including through ESPN's ecosystem as well as deeper personalization. These are four major drivers to grow our subscriber base and achieve our profitability goals. In closing, we could not be more excited about fubo's future. We believe our third quarter stand-alone performance, coupled with the opportunities unlocked by our business combination with Disney's Hulu+ Live TV, solidly position fubo for future success. We want to thank our retail and institutional shareholders for your unwavering support and to our customers for your loyalty. We remain committed to building a consumer-first streaming service that delivers more live action, less friction and superior value. 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 third quarter results reflect continued progress in both execution and profitability capped by a historic milestone, the completion of our business combination with Hulu + Live TV. We believe this transaction is a huge win for our company, shareholders, and the market, and we could not be more excited about the opportunities ahead. Taking a look at the results for the quarter. In North America, we delivered total revenue of $368.6 million, down 2.3% year-over-year and reached 1.63 million paid subscribers, a 1.1% increase year-over-year and our highest ever third quarter subscriber count. In Rest of World, revenue was $8.6 million, and we ended the quarter with 342,000 paid subscribers. In North America, advertising revenue totaled $25 million, down 7% year-over-year, primarily reflecting the absence of certain ad insertable content and one-time benefits in the prior year period. That said, demand indicators remain constructive, including upfront commitments for the 2025, 2026 cycle, up over 36% versus last year, with nearly one-third of advertisers new to fubo. Non-video formats such as pause ads and branded activations grew over 150% year-over-year. These personalized and dynamic ad experiences are driving greater engagement and reinforce the stickiness of CTV formats beyond standard video ads. Net loss was $18.9 million or $0.06 per share compared to a loss of $54.7 million or $0.17 per share in the prior year period. Adjusted EPS improved to $0.02 compared to a loss of $0.08 in the prior year period. Adjusted EBITDA was positive $6.9 million, representing a year-over-year improvement of more than $34 million. This marks our second consecutive quarter of positive adjusted EBITDA, underscoring the strength of our cost discipline and the scalability of our model. I would also like to point out our continued improvement in expense efficiency with total operating expenses now approaching parity with revenue, our best ever third quarter performance. This reflects the benefits of disciplined content spending, optimization of marketing investments and ongoing focus on scalable growth. From a cash flow perspective, net cash used in operating activities was $6.5 million or a $9 million increase compared to Q3 2024, while free cash flow was negative $9.4 million, a decrease of $8.3 million compared to the prior year. Free cash flow improved sequentially versus Q2 but was lower year-over-year, driven primarily by working capital timing. We ended the quarter with a solid liquidity position and balance sheet flexibility, including over $280 million in cash. In summary, Q3 was another quarter of steady financial progress and operational execution. We've demonstrated consistent improvement in profitability metrics, disciplined cost management and continued engagement growth. With the Hulu+ Live TV combination now complete, we enter the next phase of our journey as a stronger scaled player in the pay-TV ecosystem, positioned to deliver sustainable profitability and long-term shareholder value. With that, I'll turn the call back to the operator for Q&A.

Your first question today comes from David Joyce from Seaport Research Partners.

First of all, congratulations on completing the combination early. I was wondering about the advertising side of the business. If you could delve in a little bit more into what the content that was removed to make the comparisons a little challenging. But going forward, you will have the new advertising relationship with Disney, where they're taking care of the ad sales but you get the revenue net of the ad sales commission. So is that across all of the subscriber base that they have the ownership of on Hulu Live?

David, this is John. Maybe I'll take the first part of that, and David will take the second. On the content portion of the question, just as a reminder, we dropped Univision effectively at the end of last year. So that had an impact as number one. Number two, we also had some residual Maximum Effort Channel revenue in there as well. And then third, unrelated, but there was also a political comp in there. And so if I were to kind of normalize for the three of those, I would say ad revenue would have been up modestly year-over-year for the quarter.

Yes. And David, just to add to that, I think when you look at the results for the quarter, I think ads has been the only minor blemish on an otherwise outstanding quarter, but that's a high-class problem given our combination with Hulu Live. As we've stated, Disney will be taking over advertising sales, and we expect that as we collaborate and integrate our inventory into Disney's ecosystem and ad server, we should see pretty strong results relative to where we are today. So we're very excited about that.

Your next question comes from the line of Patrick Sholl from Barrington Research.

Congratulations on completing the transaction. Now that it has been finalized, could you discuss some of the differentiating factors regarding the full services and why you choose to maintain both offerings in addition to the sports-focused package?

Yes. This is David. I'll take that. So one is, I think this is one of the few cases of when companies combine that do not have any overlapping customers. Hulu Live does not overlap with fubo. They're similar, but quite different. We've been very focused on driving our sports identity branding and delivering capabilities for sports fans that I mentioned in my opening comments. Hulu has been more of a general entertainment bundle that has sports. And it's very important for us to continue to provide consumers with optionality and flexibility. And there's programming that we don't have on fubo today, obviously, top quality networks that are available at Hulu. So this only adds to the spectrum of offers that we provide consumers at different price points along the demand curve. So this is really part of our super aggregation strategy that we talked about as far back as 18 or 20 months ago.

Okay. And on the cost side, you had a pretty significant reduction in sales and marketing costs year-over-year. Is that partly a function just of kind of maintaining your target subscriber acquisition cost of about in that 1x ARPU range and just with the sports product being kind of lower cost and just being mathematical from that? Or is there any specific things to call out in terms of subscriber retention or additions that you're able to find efficiencies on?

Yes. Very good question. This is David. I'll take that. Look, I think that when you look at what we've been able to achieve this quarter, we had a 68% increase in net adds on a year-over-year basis while decreasing our marketing spend or sales and marketing line as a percentage of revenue by 21%. In part, that's due to the fact that we have many more offers in the market, everything from the fubo channel store to the skinny bundle to our Pro and Elite offers. And we've also begun to leverage AI, both on channel optimizations and creative testing. So all of these things have worked together, and we've stated many times that our goal is to be measured and disciplined, and we didn't see a reason to push any further given how expensive third quarter marketing is. And the last thing I'll say is that you're right, we have stated since 2020 that our goal is to maintain that SAC to ARPU of 1 to 1.5x. I'm very happy to say that this year, we've been well below the low end of that range. So we think we can become even more efficient, particularly as the structural shift in consumption continues to move in our direction.

Your next question comes from the line of Alicia Reese from Wedbush.

First, I was hoping we could dig a little deeper on the skinny bundle. The 20% sequential subscriber growth suggests that you've seen a nice uptick so far and the subscription ARPU suggests that the impact was pretty limited. Can you speak to at least qualitatively to the dynamics of the skinny bundle? Like are these new subscribers? And for those that converted from existing subscription tiers, do they primarily come from the base tier, mid-tier or premium tier?

Yes. Alicia, this is John. I'll maybe start with that one. Look, I'd say it's early days, clearly, but I'll share a couple of data points for you. Number one, look, we feel good about the $55.99 price point. At launch, the reach was about one-third of the country. Now it's north of 80% heading to full distribution by the end of the year. A couple of months in, we see virtually no cannibalization, and we think it's really expanding our addressable market. And I would just add a couple of metrics in the short term on retention and churn, it's early, but I'd say performing as expected, meaning better retention and lower churn relative to Pro and Elite.

I was just going to add very quickly that we're seeing this type of success not only in skinny bundle, but this was a strong quarter across the board for all of our offers. But of course, the skinny bundle has really delivered on trial starts, conversion to paid, net churn at least in the early days of the package.

Makes sense. And can you just discuss briefly how the Q3 marketing budget was allocated between promoting that heavy sports calendar and the skinny bundle?

Yes. Look, I think we have a world-class marketing team and retention team. And I think we're very focused on ensuring that we scale profitably. And we obviously manage almost in real time the different packages to ensure that we're continuing to drive both top and bottom line.

Your next question comes from the line of Laura Martin from Needham & Company.

David, now that you have closed the Hulu + Live deal, I'm curious about the subscription numbers. They have about 4 million subscribers, while you have around 1.5 to 1.6 million. Doesn't it seem that they are more prominent while you are playing a smaller role? I recognize you are managing it, but doesn't their larger subscriber base overshadow your strategy? Can you discuss over the next 6 to 9 months how much of the company's direction is coming from you compared to Hulu, which is significantly larger?

Yes, Laura, thank you. This is David. It's great to hear from you. We've been in this together for about five years now. I recall during our first meeting over COVID, I mentioned that we would eventually be contribution margin positive. Two years later, I said we would reach gross margin positivity. I can assure you that this is no longer a mere dream. Fubo will continue to experience substantial growth. I can outline several areas where we believe this will happen. Firstly, we are seeing impressive net adds in a quarter that is typically very competitive. We have introduced more products to the market and achieved record net churn figures, all positive trends. We removed Univision from our platform in December, and looking ahead to Q4, we are seeing record numbers among Latino audiences, which is encouraging. I believe that fubo will become a crucial growth driver for the company. There are several aspects where we expect to benefit from this new collaboration. One obvious factor is ESPN’s broad ecosystem, which includes ESPN Radio, ESPN.com, and other branches that likely engage around 100 million monthly active users. This is a resource we have yet to tap into fully. We believe there is substantial untapped potential to grow our subscriber base profitably, which could have a very positive effect on our sales and marketing expenses. Secondly, I know you've had many questions regarding advertising, and perhaps some frustration. I believe there is considerable opportunity in our partnership with Disney. Once we are part of their ecosystem, all our sports inventory—football, basketball, baseball, soccer—is expected to transition over, ideally sooner rather than later, targeting sometime in the first quarter after addressing certain technical challenges. We are transferring our ad sales team to Disney, which suggests significant potential for growth from our current position, especially considering Disney Sports CPMs and their capability to effectively fill our inventory with their scale. The third area, which excites me, has been our underperformance in programming efficiencies, likely a reason behind the stock’s lag. We haven’t secured what I consider fair deals due to the size-based Minimum Advertised Pricing. Being the sixth largest pay TV entity doesn’t convey much. I see us as the second largest virtual MVPD in the market, meaning there are structural shifts in consumer behavior and monetization that are advantageous for us, and we anticipate this will lead to growth. Lastly, we haven’t talked much about the international aspect. We have been concentrating on our unified platform, which is nearly ready for launch. We plan to onboard Molotov and migrate it to the fubo platform. Additionally, Disney has over 100 million international subscribers for its Disney+ service, and just like Hulu Live is integrated into Hulu and possibly Disney+, we see a chance to fuel significant growth there. Our goals remain unchanged; we aim to be the world's leading live TV provider, leveraging streaming to create a smarter, more cost-effective, and profitable television experience.

Super helpful. You guys have always had a world-class tech stack. Do you find you're able to use any of the new generative AI capabilities to personalize the recommendation line or personalize what you're showing to different consumers? Are you using any of those capabilities to drive better product updates?

Yes, that's a great question. It's interesting to note that, even though we've removed a significant number of channels from our platform, our ad inventory has increased by about 30% year-over-year. We're focused on providing the right programming to the right users at the right time, and we've been utilizing our AI capabilities to develop highlights for all our sports moments, presenting them to consumers who find that content most significant. When we conducted our testing the waters roadshow, we had a long-term target of around $100 in revenue per user, with a goal of achieving 30% gross margins and a 15% EBITDA margin. We're close to that target now, with our gross margin at over 20%. We need about 10 more percentage points to reach that 30% gross margin, achievable through programming efficiencies, advertising uplift, and improvements in G&A and technology. We've also seen impressive efficiencies on the sales and marketing side. Overall, I believe we are close to achieving our goals, and this transaction will help enhance the innovation and success we've built into the company. I'm excited about this, and I believe our investors should be too, as well as Disney.

Your next question comes from the line of Sebastiano Petti from JPMorgan.

Congratulations on the deal. Just maybe if you could kind of help us think about now with the added scale that you have from the Live TV combination with Hulu, I mean, how are you thinking about rest of world? Is that still core to you over time? And if so, why? And as we're thinking about perhaps rest of world, I mean, are there synergies or maybe cross-bundling opportunities when you look at Disney's international streaming services? And then following up on that, I guess, maybe a quick one. Any benefit from the YouTube TV blackout of Disney from over the weekend?

Yes, thank you. This is David. I'm very optimistic about our international prospects. It’s purely a matter of timing. Currently, we are concentrating on moving Molotov to the fubo platform. We plan to collaborate with Disney on international ventures. I believe this will generate significant value for both of our companies. Disney+ will gain from the local content we will provide in markets like France, and we have identified a few markets to focus on in the next 18 to 24 months, with plans to expand quickly into others due to the efficiency of our platform. It's obviously essential. I'm not sure why there seems to be doubt regarding international opportunities. Reed Hastings once mentioned wanting to emulate YouTube, where 80% of its revenue comes from outside the U.S. We are in a similar position and believe we can become a global leader in live TV streaming. There are hundreds of millions who still appreciate live sports and news, and we will concentrate on developing that strategy soon. Both sides are enthusiastic about this. Regarding YouTube TV and their issues with Disney, that’s not something we can comment on. However, similar to last year, we encounter regular inquiries from people seeking programming, so there's not much to elaborate on there. Interestingly, we've noticed an increase in YouTube TV subscribers while observing growth in our Latino segment, which we haven't actively marketed or tried to leverage. We’ll allow that to unfold naturally as we maintain our focus on our own business.

Your next question comes from the line of Clark Lampen from BTIG.

John, maybe in light of the comments around LatAm customer strength to start 4Q, could we dial it back a little bit and maybe talk about early October reads across the entire spectrum? And then if we were to sort of focus a little bit more medium to long term, fill rates, programming efficiencies. David, I think you said that you haven't had fair deals thus far. Maybe update us on revenue and expense synergies, I guess, on a go-forward basis and how that might impact profit trajectory? At what point could we start to see sustainable sort of EBITDA and net earnings profitability?

Clark, on the first part of that question, was that specific to advertising? Or was that more broad?

Please correct me if I'm mistaken, but it seemed like your comment was based on subscriber numbers. Regarding the subscriber growth for the fourth quarter, are you experiencing the same strength in core demographics compared to Latin America? Or was there a divide for some reason?

No. Actually, thanks for the question. Yes. I would say the strength we observed through the third quarter, specifically in August and September, has carried on into October. Relative to our plan, we are exceeding expectations across all packaging—this includes not only Latino but also Canada, skinny bundle, stand-alone RSNs, and English.

Yes. I would just add, look, the reason why we're continuing to formulate these different services and packages is because we want to reduce the cost of entry and at the same time, create attractive user economics. And you're starting to see that unfold this quarter. And as I mentioned, Latino, is really just a little seed is that we're seeing this across the board. So typically, our strongest quarters, as you guys know, is the back half of the year, third and fourth quarter, given the strength of the sports calendar. So we're, again, very excited about this. We're excited about our new relationship with Disney. I have to say the first few days have been extremely exciting. Everybody seems to be on the same page. We all know what we want, and it's going to be fubo's job to execute and drive shareholder value.

When we announced the business combination in January, we pointed out that content expense and advertising were the key areas for synergies. The ads team is already collaborating with Disney, which shows we're moving quickly. I expect to see the benefits from advertising synergy in the short to midterm. I'm also very confident about the potential savings in content expenses. The opportunity here is significant, and it's not just about the fill rate for advertising; there are other factors to consider as well, including potential upside in CPM.

And that was our final question. This concludes today's conference call. We thank you for your participation, and you may now disconnect.