Earnings Call
FuboTV Inc. (FUBO)
Earnings Call Transcript - FUBO Q3 2021
Operator, Operator
Thank you for joining us to discuss fuboTV's Third Quarter 2021. With me today is David Gandler, Co-Founder and CEO of Fubo, and Simone Nardi, 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 presentation. David is going to start with some brief remarks on the quarter and Fubo strategy and Simone will cover the financials and guidance. Then I'm going to turn the call over to the analyst to dig into Q&A. Before we begin, I'd like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities law, including statements regarding our financial condition, anticipated financial performance, market opportunity, business strategy and plans, including our acquisition strategy and ability to integrate any such acquisitions, the expected continued rollout of Fubo Sportsbook, and the continued shift in consumer behavior. 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 Quarterly Report on the Form 10-Q for the quarterly period ended September 30th, 2021, to be filed with the Securities and Exchange Commission, and our 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. 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 Q3 2021 Earnings Shareholder letter, which is available on our website at ir.fubo.tv. With that, I will turn the call over to David.
David Gandler, CEO
Thank you, Alison. And thank you all for joining us today. Before we dive into our record third quarter results, we are thrilled to announce that since closing the quarter, fuboTV has passed the 1 million subscriber mark. Yes, that's 1 million paying subscribers. This is an extraordinary milestone by any measure, but particularly remarkable given the momentum of our business over just 6 short years. The implications of the milestone are tremendous and undoubtedly far-reaching. 1 million subscribers means increased relevance, leverage, and influence with content partners and leagues, plus the opportunity to go upstream on sports tent poles. It also means billions of data points for product iteration and personalization, more monetization opportunities, and increased consumer mindshare. And even at 1 million subscribers, we are still only scratching the surface as 72 million plus households still subscribe to traditional pay television. Our record third quarter 2021 results showcase consistent strong execution of our Company's mission. It's a mission to define a new category of interactive sports and entertainment television, turning passive viewers into active participants. We continue to make great traction towards our long-term growth and margin targets, and we are once again raising our full-year guidance. In Q3, we delivered triple-digit year-over-year growth in total paid subscribers up 108%, total revenue up 156% and advertising revenue up 147% and that's compared to the prior year period. We added approximately 263,000 net subscribers, that's 56% more than in the third quarter of last year and more than the entirety of 2020. Also noteworthy, we were able to drive subscriber growth while spending less as a percentage of revenue than in the prior year. Turning to engagement, our users streamed 284 million hours. That's an increase of 113% year-over-year. Our monthly active users watched 121 hours per month on average. While this is strong engagement, it was impacted by the huge influx of new subscribers at the end of the quarter. As these new cohorts mature, we expect to expand their engagement and monetization. The third quarter was also record-breaking for our advertising business, representing our strongest ad sales quarter to date. Ad revenue grew 147% year-over-year and accounts for 12% of total revenue in the quarter. Alongside our record revenue growth, we also made meaningful progress towards our profitability goals. Adjusted contribution margin was 12.4% in Q3, up 189 basis points compared to the normalized third quarter 2020 results. This was driven by ARPU expansion with both advertising and subscription, partly as a result of strong execution associated with upsells and packaging. Our attach rate was 2.3%, up from 1.8% in the third quarter of 2020. We sold 2.2 million attachments as of the end of the quarter. It's also illustrative of our ability to expand ARPU and extend the lifetime value of our customers through the provision of additional products and services. This positions us well to drive adoption of our wagering product. Today, we announced a major milestone towards global expansion with the acquisition of Molotov, France's leading live TV streaming platform with 4 million monthly active users. Molotov operates a freemium business model, which leverages a free tier to drive growth, then upsells customers to premium channel packages. The technology capabilities between the companies will enable us to efficiently launch our interactive sports and entertainment streaming platform on a global scale. Our transaction is expected to close sometime within the first quarter of 2022, and that's of course subject to certain closing conditions. Our internally built technology stack is the cornerstone of our platform, and that has kept us innovating ahead of the streaming industry. We are prioritizing our product and engineering capabilities to bring to market a category defining streaming experience characterized by interactivity. This is a long-term commitment we're making in our product and expected to yield strong and defensible competitive advantages over the next few years. Accordingly, we are thrilled to announce the acquisition of Edison AI. Edison is an AI powered computer vision platform with patent pending video recognition technology based in Bangalore, India. With Edison AI, we will be able to create new experiences that integrate interactivity and data directly within our live TV feeds, pushing the boundaries of innovation even further. The acquisition also expands our data science and engineering organization globally. Last quarter, we announced the beta release of 2 new interactive features, FanView and free-to-play predictive games. Throughout Q3, we continued to iterate on each and expanded their rollout to additional leagues. We're very excited about the potential to further engage our subscribers and ultimately to become gateways to real money wagering. Our wagering business also continues to evolve. We are transforming how consumers watch and engage with live television with our first-generation integrated Fubo Sportsbook, which launched November 3rd in our first state, Iowa. This is the first of a healthy pipeline of other states, where we plan to launch in the ensuing months, which will allow us to unlock the scale of our growing subscriber base, driving down betting acquisition costs. In addition to serving as an important new on-ramp to our platform, we believe this will over time improve engagement and retention while driving monetization and advertising sales. We believe only Fubo TV has brought to market this seamless connection between streaming video and our mobile betting app. We see ourselves in the very early innings of an enormous opportunity to innovate. While we are very pleased with our progress to date, we are taking a very measured and deliberate approach as we operationalize this initiative. So in summary, I am exceptionally proud of our execution this quarter. We are building a category-defining streaming experience that will achieve a strong flywheel, driving subscriber growth, increasing engagement, and enhancing monetization, while also attracting advertising dollars to our high-quality premium-paying audience. All while we continue to benefit from our optimal position at the intersection of 3 mega trends: the secular decline of traditional television, the shift of TV ad dollars to connected devices, and the rapid adoption of online sports wagering. I look forward to updating you on the progress and will be on Twitter later this evening to interact with shareholders. And now, I'll pass it over to Simone to discuss our Q3 financial highlights and raised guidance for 2021. Simone, please.
Simone Nardi, CFO
Thank you, David and good afternoon, everyone. I'm very pleased with our strong third quarter results as we exceeded our outlook and made significant progress in delivering efficient top-line growth and margin improvements. In the third quarter, we delivered triple-digit year-over-year growth in both subscription and advertising revenue, taking overall revenue up 156% to $156.7 million, up 20% sequentially over the second quarter. Subscription revenue increased 158% year-over-year, to $138.1 million driven by strong growth in subscriber numbers and ARPU. We ended the quarter with 945,000 subscribers, an increase of 108% or 263,000 net additions compared to Q3 2020. We delivered this robust growth through acquisition efficiencies, as well as improvements in retention resulting from our interactive product and curated content offering. Subscription ARPU expanded by 10% year-over-year to $66.31 as we saw more subscribers taking our premium offerings. Advertising ARPU grew 10% year-over-year to $8.23. Advertising is a key component of our growth and monetization strategy, and we saw continued strength on this front. Advertising sales were the highest to date in the third quarter of 2021, surging 147% year-over-year to $18.6 million and accounted for 12% of total revenue. The strong results for our advertising business were driven by the strength in our subscriber growth, increasing CPM, and fill rate optimization. As expected, we saw a large influx of subscribers within the last few weeks of September. As these new subscribers become more familiar with the platform and mature into long-term subscribers, we expect to expand their monetization further. Switching out to profitability, we made significant traction towards our long-term goals, delivering an adjusted contribution margin of 12.4%. This was up 189 basis points year-over-year compared to our normalized Q3 2020 ACM of 10.5%, which we reported in our earnings last year. Our Q3 2020 ACM of 16.1% reflected unusual timing of content deals in July 2020. Our contribution margin expansion in the quarter was driven by the improvement of advertising ARPU and subscription ARPU, as well as by the continued data-driven optimization of our content offering. This positioned us well to continue making strategic investments in content, technology, and infrastructure to optimize our market position and grow share while driving long-term margin expansion. Accordingly, our strategic investments have resulted in the third quarter in expected expenses increase in absolute dollar terms year-over-year. However, expenses continue to grow significantly less than our revenue growth and accounted for 166% of total revenue in Q3 2021, significantly less than in 2019 and 2020, underscoring our continued focus on driving operating leverage in the business. Within expenses, I would like to highlight how subscriber-related expenses, which primarily consist of content costs, accounted for 91.5% of total revenue in the quarter, an improvement of 8.5% points compared to the prior year period. Our sales and marketing expenses, as a percentage of revenue, declined from 36% in the third quarter of 2020 to 32% this quarter, showcasing our efficiency in growing our subscriber base. As a result of this continued operating leverage, we achieved a material year-over-year improvement in adjusted EBITDA margin from -77.6% to -51.9%. Net loss in Q3 was $105.9 million and included approximately $21 million in non-cash expenses including stock-based compensation, re-measurement of warrant liabilities, amortization of intangibles, and their discount. EPS in the quarter was -$0.74 compared to a loss of $6.20 in the third quarter of 2020. Adjusted EPS in the third quarter 2021 was a loss of $0.59, excluding the non-cash impact of stock-based compensation, management award liabilities, and amortization of intangibles and their discount. Expenses incurred for the launch of our wagering business impacted EPS and adjusted EPS by $0.05 in the quarter. Now, turning to the balance sheet, we ended the quarter with $398.5 million in cash, cash equivalents, and restricted cash. These include a $70 million net proceeds in the quarter from our at-the-market offering, as well as $7 million in interest payment and $33.7 million of cash outflow related to wagering, mainly in connection with our market access licensing deals. As was previously highlighted, defining our $500 million ATM in August is part of our ongoing capital optimization strategy to build optionality to fund growth initiatives while further strengthening our balance sheet. Operating cash flow in the quarter was negative $55.7 million, inclusive of $5 million of non-recurring payments, $5.2 million associated with the wagering business, and $7 million of interest payment for the 2026 convertible notes. Moving onto our outlook, with the strong performance in the third quarter of 2021, we believe we are well-positioned to continue to execute on our long-term revenue and margin goals. Therefore, we are once again increasing our full-year 2021 revenue guidance to $614.5 million at the midpoint. It's a better number, representing a 135% increase year-over-year, up from an increase of 116% reflecting our prior guidance. Similarly, we are increasing our end of the year subscriber guidance to 1,065,000 at the midpoint of the guidance, up 94% year-over-year. This guidance implies full-year 2021 net additions of approximately 517,000, 123% higher than our full-year 2020 net additions of 232,000. Our current guidance does not include any revenue contribution from our sports wagering business, nor from our recently announced Molotov and Edison AI acquisitions. In closing, we're very pleased with our performance this quarter, and we continue to efficiently drive robust growth and operating leverage. Thank you for joining our call today. We will now take your questions.
Operator, Operator
Thank you, David. Thank you, Simone. We're now turning to the Q&A portion of our call. We ask that in the spirit of timing that you limit yourself to 2 questions please. And our first question comes from Jed Kelly with Oppenheimer. Jed, great to see you. Please go ahead.
Jed Kelly, Analyst
Great. Thanks for taking my questions. Just 2 if I may. 1. Behind the acquisition, the strategy to expand internationally versus if you look at the U.S. it still have a lot of opportunity for growth. Still a couple channels with a lot of sports content that you don't have on your platform. So can you talk about the acquisition strategy? And then on the Sportsbook, Iowa. Any early learnings you can share or what they tax rate their subscribers? Thank you.
David Gandler, CEO
Thank you, Jed. You always ask great questions. Regarding our acquisition strategy, we've mentioned before that we plan to be opportunistic, and we have two distinct acquisitions to discuss. First, there's the technology-based acquisition, specifically Edison AI, which we are very enthusiastic about. This company provides essential back-end technology for us. It enables real-time extraction of metadata from video, which opens up numerous potential use cases for our business. In the short-term, this technology will allow us to synchronize video with the data stream, using clock data capture. Long-term, it could enhance the video experience significantly, including improvements to electronic program guides and digital video recorders, and it also presents advertising opportunities by extracting contextual value from the displayed frame. This technology positions us well to advance our integration strategy. As for our acquisition of Molotov, there are two key reasons for this deal. First, we face considerable challenges in hiring engineers in the U.S. due to labor market conditions, but Molotov has a strong team of over 100, and our businesses have many similarities that mean there's a synergy in technology, infrastructure, and operational models. We aim to integrate quickly, which should enhance our development speed. Secondly, Molotov is the second-largest streaming application in France, a major European market with more than 60 million households. With 4 million monthly active users, this acquisition provides an excellent opportunity for us to learn about their freemium business model—where they offer a free tier of content, specifically live TV channels, and upsell users to a paid tier. This insight will help us leverage our U.S. market knowledge as we build a scalable global platform. Our focus on the U.S. remains unchanged, and the recent growth to 1 million subscribers demonstrates our commitment to increasing our U.S. subscriber base and expanding our business. Regarding your second question, if I recall correctly, it was about the book; as you know, we launched...
Jed Kelly, Analyst
in Iowa.
David Gandler, CEO
Yeah, we launched November 3rd. Look, we're very excited. We did what we said we were going to do. And this was not an easy task, it was not an easy lift to launch a sportsbook in less than 12 months. And we've been working with regulators, and we shared with you our live sync feature. So far, it's very early, I mean, we've been live for a week. We'll have to take our time over the next couple of weeks to really better understand what we're seeing, but so far, I think what's interesting is that there is interest from our subscribers to play. That's a very important piece here if you think about the reason why we did this. The whole point of this was really to reduce the cost of entry, number 1, and number 2 is to create very attractive user economics. We think that what we've seen in these early moments is really important. What I will say is that the market access licenses are probably an area where we're going to focus on throughout 2022, because given what we've seen, at least in the first few days, we want to take advantage of our growing subscriber base. So when you have a million people that you can talk to every day and you've seen how successful we've been with our attachments, selling over 2.2 million attachments this year, we're very comfortable in our ability to actually create a new revenue stream and upsell existing customers.
Operator, Operator
Great.
Jed Kelly, Analyst
Thank you.
Operator, Operator
Jed, thank you for your thoughtful questions. Our next question comes from Shweta Khajuria, who is with Evercore. Shweta, always good to see you. Please go ahead.
Shweta Khajuria, Analyst
Thanks, Alison. Let me try 2, please. David, what would be your top 3 investment areas for next year in terms of resources as well as the focus of your team? And then a quick follow-up on churn. In the shareholder letter, you said churn improved on the year-over-year basis. How did it trend sequentially? Thank you.
David Gandler, CEO
Yeah. Very good question, Shweta. I'd love to tell you about our go-forward strategy, but obviously if we tell you, then we're going to make it very difficult to be able to acquire assets the way we've done this year, which we're very happy about. So I think what I'll continue to say is we're going to be opportunistic. We're looking for companies that fit culturally, number 1, because this is a performance-driven Company. We continue to execute quarter-over-quarter and year-over-year. But again, it's something we'll continue to look at and refine over the course of 2022. With respect to churn, as you said, we saw a decrease of 78 basis points, and we're very happy with that. We said that our goal this year was to get churn in a place where we're very comfortable. I would say churn is relatively flat, quarter sequentially, but remember we also had the Olympics in July, which typically drives significant churn, but we have been able to mitigate a lot of the churn that we felt would put us at risk for the third quarter. As you could see, it really drove up our subscriber numbers, so we're very happy about that. We're also happy about our reactivation numbers that have been extremely strong, and all of that is really related to the content offering that we provide to our subscribers, as well as the product improvements that we're seeing. So we're very happy with this quarter and looking forward to Q4.
Shweta Khajuria, Analyst
Okay. Thanks, David.
David Gandler, CEO
Thank you.
Operator, Operator
Thank you, Shweta. Always good to see you and thank you for the questions. Our next question comes from Laura Martin with Needham.
Laura Martin, Analyst
Hey there, David. Fourth quarter as a public Company, fourth quarter beating rates. So these are excellent numbers again.
David Gandler, CEO
Thank you.
Laura Martin, Analyst
That's why you're here. You're doing your job.
David Gandler, CEO
That's why we're here. Thank you so much.
Laura Martin, Analyst
Okay. Two questions for you. One is the NFL ratings are astronomical this year, and that seems to be a key catalyst to driving your extraordinary subscriber growth. My question is, post Super Bowl Sunday, what are you going to do to try to hold onto these guys to increase their longevity past the end of NFL season? Let's start with that one.
David Gandler, CEO
I believe that's an excellent point. The NFL season has been outstanding for us. Additionally, we had a complete college football season, and we're very enthusiastic about the return of college sports. This has definitely made a difference, especially in September. We are dedicated to continually enhancing our product and exploring ways to improve features that will boost engagement. The cohort from September is particularly noteworthy, as we achieved 96% viewership of sports on our platform. This is the highest percentage of sports viewership we've ever recorded, surpassing the previous record of around 93% or 94%. It shows that there is still room for growth. We remain committed to maintaining the momentum we had in the first quarter of 2021, focusing on further upgrading our product. As we move into the first quarter, we look forward to discussing our free-to-play options and predictive games, which we believe will enhance retention as we enter new states for sportsbook offerings.
Laura Martin, Analyst
Okay. That's super helpful. When I think about CTV, you had really good results with the highest CTV revenue growth of any company that has reported, which is impressive. I appreciate how that is impacting your gross margins. You have a strong gross margin over delivery. Is most of that coming from advertising, David, or is some of it coming from subscription, which is a variable cost business? I'm trying to determine if you're gaining leverage on the variable cost aspects of the business in addition to advertising.
David Gandler, CEO
We mentioned in our shareholder letter and my opening comments that, given our current scale, we're going to start seeing some level of escape velocity. When that happens, we typically have more control over our discussions with content partners. We've been updating our content portfolio, and we made some changes at the end of the second quarter that we believe have positively impacted our margin profile related to variable costs. On the advertising side, we continue to see a lot of strength. Advertisers are not only shifting from TV but also moving towards data-driven ad buys, an area where we're starting to make a significant impact. It's compelling that we have three levers to pull. Our CPM year-over-year remains relatively low, increasing about 4% from just over 21% to 23%. This presents a high-class problem, as there's potential for around 50% growth in CPM, provided other factors remain constant. This illustrates the opportunities we have in advertising and the potential to enhance our margins over the long term.
Laura Martin, Analyst
Thanks, David.
David Gandler, CEO
Thank you. Be safe.
Operator, Operator
Thank you, Laura. As always, great questions. Our next question comes from Dan Salmon at BMO. Dan, please go ahead.
Daniel Salmon, Analyst
All right. Thank you, Alison. Good evening everyone.
David Gandler, CEO
Hey Dan.
Daniel Salmon, Analyst
Hey David, it's Salmon. So David, multiple as you said leading platform in France. They've also got a little footprint in Africa and have a standing there, you've got the Canadian business and Spanish business. So what is the scope of your international ambitions right now? You seem to have a healthy part of North America and EMEA covered, I mean, should we expect APAC and South America to come next? And then just the second one, if there's some wording in the shareholder letter about crossing the 1 million mark that gives you some better most favored nation protection. Can you just speak to that a little bit more specifically and if there's some milestones in your contracts that passing that activates in particular?
David Gandler, CEO
It's great to see you, Dan. It feels like it's been a while. Regarding your first question about our international ambitions, we have one major goal: global domination. We're proving this consistently in the United States. In terms of our new subscribers, we had 263,000 net additions. The traditional pay TV churn rate is around 1.2 to 1.3, and we captured about 20% of that traditional churn in net subscribers during the third quarter. When I consider the market trends I anticipate over the next 5 to 7 years, I’m really excited. Our team is performing exceptionally well in the U.S., and we’re being strategic about our international expansion, selecting assets that could provide significant value. I want to emphasize the cultural importance since we are a performance-driven company. I’m not saying we’ll expand into Latin America or any specific region, but if we identify an asset that can greatly benefit the business, we should take advantage of our market capitalization to acquire it. Additionally, the Edison AI transaction is noteworthy; it is truly transformative. The impact of computer vision is significant — it enables tracking of players, frame-accurate data, and extraction of metadata from live video, which we can leverage across advertising, product sales, and all our activities. This acquisition is crucial and positions us well for our global offerings. Finally, in response to your question about Molotov in Africa and other topics, we were drawn to Molotov not only because they have 4 million monthly active users and a strong development team but also due to their technology that allows efficient localization across different regions. At Fubo, we are focused on seizing opportunities, acting quickly, and leveraging data, and this partnership offers the vital optionality I value most.
Operator, Operator
Dan, thank you for your thoughtful questions. Our next question comes from Jim Goss with Barrington. Jim, always good to see you. Please proceed with your question.
Jim Goss, Analyst
Hi David, hi Simone. You're discussing your global ambitions, and I'm curious about the domestic growth, specifically regarding the expected expenses over the next few years. Who do you believe you will be taking market share from? I assume it's from broadcasters, but do you think you're also competing with other players in your industry?
Simone Nardi, CFO
Thanks for the question, Jim. I think in terms of the overall growth that we have in the business, as you've seen we had to guide into very significant numbers. To David's earlier point, we are taking on a significant portion of people that are coming out of their regular traditional cable offering. We are taking in a significant portion of that, and as you can imagine, our market share is expected to continue to grow within the virtual MVPD space as well. I think there is definitely an influx of subscribers coming from the traditional cable ecosystem, as well as subscribers that are appreciating the features that we provide in our platform and allow us to attract them to our platform from existing virtual MVPD space, as reflected by the most likely marketing share increase with individual equities.
Jim Goss, Analyst
First of all, you mentioned the usage patterns. I assume most viewing happens at home, but are you seeing an increase in users accessing the service remotely while traveling?
Simone Nardi, CFO
Yes. So we're seeing a lot of viewership on our connected television, that is actually really good for advertising purposes. As well as to your point, we offer the flexibility of an app that is downloadable and usable on many different platforms and items. So it's actually allowing us to provide the flexibility for people across the board that is a benefit that we think is resonating well with subscribers.
Jim Goss, Analyst
Okay. I might just also ask. Could you flesh out the concept of the games, the non-betting type games? What exactly do you think you were going to bring to the table and how would you sustain engagement through that area?
Simone Nardi, CFO
Sorry, Jim, again.
David Gandler, CEO
Yeah. Jim, could you ask that question again? Hi. It's David. Sorry, I couldn't hear the first.
Jim Goss, Analyst
Yes. You've mentioned some additional types of games that could engage users and help maintain their interest. I'm curious about what you have in mind for that area.
David Gandler, CEO
Yeah. We've been very focused on free-to-play games. I think we showcased video where you could see you can get into the user initiated format where you can watch an event and then play these predictive games. So you could ask questions like, will they score a touchdown? Will they take a field goal? Will they throw a pass? Will there be an interception? Will this player play? So all of these engaging questions during the game we think adds a lot of value, and we've seen that. We've been running a bunch of tests on our comparable games and we've seen engagement increase by anywhere between 30% and 40%. So we're going to continue to work on that and create a platform in which we think users will engage more. And if they are engaging more, as you know, that impacts your advertising sales and also your retention. So the more that we can get people to stay on the platform, the better. The other thing I think that is also important, a bit secondary at the moment, but I think will come to the forefront pretty quickly in 2022 is the fact that we're now isolating players that were people that like to play these games. So the question is, if you are a casual better, or someone who likes to play these games, will you potentially participate in a bet for events that you typically we can tell what you went out. You pick field goals, you picked football games, you picked soccer games. That gives us another edge in trying to reduce that cost of venture and drive subscribers into our betting funnel at almost no cost. So that's the plan with that. And again, this acquisition of Edison AI is important because it allows us to sync a lot of this information, allows us to learn what people are viewing and watching and then on a discrete basis, we'll be able to provide hundreds of games, thousands of games. All of this is something we've been talking about for a year. What's interesting is, Netflix is doing the same thing. They're launching their gaming platform to engage with consumers, to extend their brand value of shows like Squid Game and Stranger Things. These are all things that we felt we've been pretty much first, but we're starting to see other companies develop platforms in similar ways, so we're super excited about that.
Jim Goss, Analyst
Thanks very much.
David Gandler, CEO
Thank you.
Simone Nardi, CFO
Thank you, Jim.
Operator, Operator
Jim, thank you so much. Our next question comes from Zach Silverberg with Berenberg. Zach, good to see you. Please proceed with your question.
Zachary Silverberg, Analyst
Hey. Good evening. Thanks for taking my question. My first one is on your partnerships with NASCAR, the Jets, the Cleveland Cavaliers. What do these partnerships mean for the growth of the Sportsbook, customer acquisition, market entry, and what sort of partnerships do we see on the horizon?
David Gandler, CEO
Good question, Zach. Look, we're getting into the space, we're getting our feet wet right now. We want to make sure we have certain partnerships to be able to leverage IP with some of these major partners. As you know, we've now exceeded a million subscribers. We want to build on that brand equity and we're looking for those right relationships. And as we continue to develop our gaming strategy, we'll look to expand our partnerships. Right now we're pretty happy with the partnerships we have in place.
Zachary Silverberg, Analyst
Got it. And then on the ad revenue side of the business, can you just talk about what's driving some of the stronger ad growth year-over-year?
David Gandler, CEO
Yeah. Again, it really comes down to basic elements of advertising. As I just mentioned, there are really 3 components that drive advertising sales for the Company right now. 1. Is the fill rate, 2. Is the CPM, and 3. Is the viewership hour. So those are the 3 levers that you can pull to drive. Now, the good news is we don't have to drive all 3 of them every quarter. We can drive, sometimes it's 3, sometimes it's 2, sometimes it's 1. And so this quarter, what we've seen it's a combination of a few elements, 1. Is the increase in CPM that we're seeing from somewhere around the 21 to 23 range, which really again keeps me excited because there's a long way to go to hitting the CPM that we're typically seeing on connected devices, which is 30 plus. So that just should indicate to you that there's strong growth. The other one is the viewership hours, I'll leave for last and then there's the fill rate. And the fill rate, again, we have opportunities. We've been testing 15 second units versus 30s, and advertisers seem to really like those. So we're going to continue to focus on CPM and fill rate for now, but the good news is we've got a long way to go. Viewership hours continue to increase. Obviously, there was an influx of subscribers at the end of the third quarter, which took the number down somewhat. But on a year-over-year basis, we feel very comfortable we'll continue to drive engagement. So advertising, certainly a very exciting space for us and we'll be investing into our ad-tech to be able to drive those numbers higher.
Zachary Silverberg, Analyst
Thank you.
Operator, Operator
Zach, thank you for your questions. Our final question is with Dillon Heslin with ROTH. Dillon please proceed with your question.
Dillon Heslin, Analyst
My apologies.
Operator, Operator
No worries. It happens to all of us. Thank you.
Dillon Heslin, Analyst
Thank you for taking my question. Congrats on the million subs. First, on some of the attach rates. You talked about the 2.3 million in attach rate this quarter. Can you talk a little bit about what that mix is between your existing subs who are deciding to up their plan later on versus a new sub who comes on at that higher ARPU off the bat?
David Gandler, CEO
It's evident that new subscribers alone aren't driving growth since we recorded 2.2 million attachments at the end of the quarter. This indicates that, on average, for every subscriber, we are selling 2.3 products. This trend is consistent across the board. Typically, in the third and fourth quarters, we see an increase in subscriptions to our Sports plus package, which includes the red zone. We expect, as we have observed in previous years, that there will be a decline in ARPU after the NFL season as some customers reduce their packages, which often feature the red zone.
Dillon Heslin, Analyst
Got it. And then as a follow-up. On the sales and marketing expense, I know you talked about that being down as a percentage of revenue of about 300 basis points year-over-year, but it's up over double quarter-over-quarter in absolute dollar terms. Obviously, you had the subs to back that up. But where do you start to think you can see that absolute dollar figure plateau?
David Gandler, CEO
It's difficult to evaluate from a purely dollar value standpoint since the company is only six years old. In 2020, the average age of a company was around twelve years. This company is in a significant growth phase. When I assess sales and marketing as a percentage of revenue for others like Roku, DraftKings, or Netflix, the figures are relatively high. We're aiming to stay within the 30% to 35% range, though that percentage has decreased somewhat. We remain confident that our average subscriber acquisition costs align with our long-standing guidance, which is between 1 and 1.5 times our first month's average revenue per user. As our first month's ARPU rises, we have the capacity to invest more in attracting subscribers. It's important to note that we've gained highly valuable subscribers throughout 2021, as shown by our improving retention rates. In fact, our September cohort for the NFL exceeded our typical expectations. We're very optimistic about our current spending and the caliber of customers we're drawing to the platform.
Simone Nardi, CFO
And to that, on that deal, I mean ultimately the whole improvement in our operating leverage is driving efficiencies in marketing as well as on all the other expenses. You see also on the content side, with subscriber-related expenses going down 8.5 percentage points compared to last year of the same quarter. So that is continuously reflected in our improvement in adjusted EBITDA margin, and in general, in our margins.
David Gandler, CEO
Dillon, I'll just say one thing. We are at the very early stages of the evolution of this business. It's actually quite remarkable, I just want to give a quick shout out to the team they have done a phenomenal job. Expectations, as you know, are extremely high. The competitive set is very difficult for us to deal with. Our numbers are public everybody is looking at them. So again, I just really want to give a quick shout out to the team, the retention team, the marketing team, the product team, the engineering team, the Fubo Sports network team, the finance team. So all these groups are really working cohesively to be able to drive value across all of our KPIs.
Dillon Heslin, Analyst
Thank you guys. Appreciate it.
David Gandler, CEO
Thank you.
Operator, Operator
Dillon, thank you. And this concludes the Q&A portion of our call. We thank everybody who participated for your time and your thoughtful questions, and we look forward to continuing to update you on the progress of the business in ensuing quarters, and would encourage you, to any extent that you have additional questions to reach out. Thank you again and look forward to speaking to everybody soon. Thank you.
David Gandler, CEO
Thank you.
Simone Nardi, CFO
Thank you.