Good day, and welcome to the fuboTV's Second Quarter 2022 Earnings Call. Today's call is being recorded. All lines have been placed on mute to prevent any background noise. And after the speakers' remarks, there will be a question-and-answer session. I would now like to turn the conference over to Alison Sternberg, Senior Vice President of Investor Relations. Please go ahead.

Thank you for joining us to discuss fuboTV's second quarter 2022. 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 presentation. David is going to start with some brief remarks on the quarter and fubo strategy and John will cover the financials and guidance. Then, I'm going to 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, including quarterly and annual guidance and cash flow and adjusted EBITDA targets, market opportunity, expectations regarding growth and profitability, subscription levels, the Molotov acquisition, expected synergies of the technology platforms and related savings, business strategy and plans, the continued shift in consumer behavior and our strategic plans regarding fubo Sportsbook. 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 Form 10-Q for the quarterly period ended June 30, 2022 to be filed with the Securities and Exchange Commission and 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 certain 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 Q2 2022 earnings shareholder letter, which is available on our website at ir.fubo.tv. With that, I will turn the call over to David.

Thank you, Alison, and good afternoon, everyone. We appreciate you joining us on the call today. The economic environment has fundamentally changed since our first quarter earnings call. While there is ongoing uncertainty, we do believe these challenges will accelerate cord-cutting as consumers seek an affordable sports and entertainment streaming alternative. But we also realized the cost of capital is increasing and that the market's appetite for profitable growth is clear. While we believe fubo's model will prove to be both resilient and profitable, we also know we must continue to refine and adjust our business to reflect this changing economic environment. Therefore, we remain focused on reducing internal costs and continue to review our entire cost structure to identify additional areas of savings. In parallel, we will continue to work to drive measured growth by improving content-related unit economics and materially growing our high margin advertising revenue. We continue to believe that an integrated wagering platform, offering both live video and a sportsbook, will result in the best viewing and gaming experience for consumers. However, we decided to enter the wagering business in early 2021 at a time when the business climate and efficient cost of capital provided the runway to develop new business clients with longer profitability time horizons. Now, with the recession and inflation hitting 40-year highs that no longer holds true. We recognized that the market has changed and therefore, we have made the decision to place fubo Gaming, our online sports wagering business under strategic review. We will no longer pursue this opportunity on our own and are exploring the best path forward to scale the business. We look forward to continuing to update you as conversations progress. Now let's turn to our second quarter results. Against this challenging environment and continued focus on reducing…

Thank you, David, and good afternoon, everyone. We delivered double-digit year-over-year growth in North America across several of our KPIs, subscribers, total revenue and ad revenue. Notably, our streaming business in the rest of world came in consistent with expectations on revenue and ahead of expectations on subscribers. As sports is a seasonal business, we again expect to see sequential growth in the second half of 2022 as the live sports calendar enters its busiest period with the English Premier League and college football seasons kicking off later this month. Starting at the top, second quarter revenue was $222 million. This includes North America streaming will be delivered revenue of $216 million, slightly below guidance due to a shortfall in subscribers. North America subscription revenue was approximately $194 million, an increase of 70% year-over-year. This was primarily driven by paid subscriber growth of 41% as well as subscription ARPU expansion of 2%. Our Rest of World streaming segment generated $5.8 million of the revenue in the quarter on a base of 347,000 subscribers. Advertising revenue increased 34% year-over-year to $22 million and accounted for 9.9% of total revenue. Ad ARPU decreased approximately 18% year-over-year to $7.25. Although on a sequential basis, ad ARPU increased 5.5% over first quarter of 2022 levels. We expect this metric to improve as the year progresses, which we believe will position us to expand the contribution margin over time. Our second quarter adjusted EBITDA loss came in at $79.1 million compared to a loss of $47 million in the prior year. This also represents a sequential reduction from a loss of $105 million in the first quarter of 2022. We had a second quarter 2022 earnings per share loss of $0.63. Adjusted EPS in the second quarter of 2022 was a loss of $0.45 and…

Thank you, David. Thank you, John. We are now going to turn to the Q&A portion of our call.

Thank you. Today's question-and-answer session will be conducted electronically. [Operator Instructions] We'll take our first question from Clark Lampen with BTIG.

Thanks a lot. Good evening. I've got two. I'll just ask them upfront quickly. David or John, maybe you could elaborate a little bit on the operating backdrop and what you're seeing that's sort of driving the guidance reduction for the year. There's been some discussion, I think, recently of flowing top of funnel growth churn, pressure on CTV. Is that what you're seeing right now? And if so, maybe could you talk about the second derivative of it? And John on financing, you guys talked about sort of reducing cash burn. Maybe I missed it, but I don't think you gave an update on sort of where things stand right now with the ATM, but also with the ballpark $400 million of cash that you have on the balance sheet right now. How do you guys feel about sort of runway? Is there an updated auditor opinion that you might share? Anything that you could talk about on that front would be helpful. Thanks a lot.

Hey, Clark. This is John. I'll start off. It sounds more like too long when it's not too short ones though. So look, I think on the second question, I'll start with that. And then David and I will probably throw back and forth on the first one. But look, in terms of the cash and the ATM, I think it's a fair question to be asking. And like, as I mentioned in the prepared remarks, we finished the quarter with $379 million in cash and we expect the burn to improve sequentially in both 3Q and 4Q. And then I would also say a couple of things to give you, I guess, I call it some more context on how we think about the ATM and capital needs. On the first side of that, I would say as a reminder, given the early signs of the macro uncertainty to start the year, we raised about $220 million using the ATM in the first quarter. And as a reminder of the average price, there was at about $7.50. With the weakness in the stock over the past few months, we have not tapped that ATM for additional capital or have we needed to, of course. The second point I would say is to David’s comments as you heard, we're looking at strategic alternatives for our gaming business and they also serve to effectively raise capital by reducing our cash burn. So I'd expect that would organically extend our runway as well, and then further bolster cash. So while I think the ATM is a great tool and it allows us to be opportunistic, gives us optionality in a volatile market as we're seeing currently. We also think that our existing cash position gives us flexibility to not raise capital at current levels. Let me start with a couple of comments on your first question. One is – I'm sure it's really interesting, right? Because I think typically the way a lot of people think about churn and macro is as macro softens churn goes up, right? And candidly, you didn't ask this, but I would tell you that in Q2, we saw a slight uptick in churn versus 2Q of last year, but that was, we think really more driven by the timing of the sports calendar in June this year versus last year, where it was a tough comp. When we look at the third quarter, currently in July, we saw churn actually down year-over-year versus July of last year. And I think we feel pretty good about how August is starting, although it's early. So hard to say if there's anything that's obvious in terms of affecting our business at this point, but not really seeing it there. In terms of the…

Sorry, John. I just want to – I'll chime in a little bit here. Clark, this is David. I don't know how long you've been following fubo, but if you think about 2020 pre-COVID, what you're probably seeing is a very similar seasonal cadence. If I'm not mistaken and I don't have the numbers in front of me, I think we were down about 9% in the first quarter of 2020 versus the fourth quarter of 2019. And then we saw – we were relatively flat in Q2 of 2020, probably down about 1% or 2%. So what you're seeing is a return to the pre-COVID seasonality. I don't – I agree with John, I don't see this as any – there are any risk in terms of economic risk. In fact, I would argue that the worse the economy gets, the less discretionary income available, I think people will actually start to really consider moving from traditional television to streaming, particularly given the fact that you have a very strong sports calendar highlighted by the NFL starting in the ensuing month. So again, we're very bullish on the overall macro. You have about 65 million to 68 million subscribers still in the traditional ecosystem. And then on top of that, you have consumers stacking plus services, which are becoming somewhat burdensome and costly. So I think we're actually in a good spot. And as John said, we will return to record growth. At least that's what we're forecasting in the third quarter relative to where we ended 2021.

And maybe I'd add one last thing to that, which would just be – when you look at our assumptions in terms of the guidance, right, the third quarter assumes, call it, organic 29% year-over-year growth on revenue. And it assumes subscriber growth of 22%. So I'd say still very healthy growth. And then if you go into the fourth quarter or call it the full-year, you get back into the fourth quarter, but essentially we're looking at 45% year-over-year growth on North America streaming revenue and then call it around 20%-ish growth at the midpoint on subs.

Really helpful. Thanks.

We'll take our next question from Laura Martin with Needham.

Hey, there. Stock up 18% after hours. So nicely done. I want to talk about the gaming business. So David, at the beginning, the wagering – at the beginning, you sort of said, you're going to look at strategic alternatives, but then later on you said, you're really excited about getting New Jersey a year from now. So can you actually dovetail those two like – those two comments first?

Yes. Sure. So on the latter question around New Jersey, it's actually imminent. So we've already submitted to the DGE in New Jersey, and we're hoping to hear back from them in the next few weeks. So we will be live in New Jersey roughly around the beginning of the football season. And the reason I'm still bullish on the intersection of video and gaming is that integrated experiences build the sensibility. And it's something that is a cornerstone of what we're doing given the fact that we're a sports platform. With respect to the first part of your question, I think it's become apparent that we cannot go in alone given the cost associated with driving that business to cash flow break even. And then just want to remind everyone that the assumptions that we were under when we made this call, the cost of capital was pretty much free and so the time horizon to develop that business was significantly longer than – investors have an appetite to wait for today. So again, we're still very bullish on gaming. We will launch New Jersey imminently. Hopefully, we'll get an approval in the next few weeks. But we will look for opportunities to partner with other companies and given how much we've already built out with the pick'em games and some of the other features, it could be quite compelling. We also have, if I'm not mistaken 10 or 11 market access license deals in place. So we have some value to offer a partner who's looking to quickly get into the business. And at the same time, not have to worry about spending a lot of money marketing to consumers given the number of customers we have as well as the number of trials that are coming in on a regular basis.

And Laura, I would just add, super high-level big picture takeaway, I think should also be that, we're really hyperfocused on our path to profitability and producing our cash burn and we're optimizing our assets.

Perfect. My second question, my second and last question is on advertising. So David, I actually really don't mind these ad numbers because you actually – if you'd held the CPMs constant, you would've been up 50%, which will be the strongest connected television growth announced to date anyway in earnings. So can you talk about like what happened with pricing and why it's cyclical or why you can fix it by year-end because these are actually really robust impression growth numbers you're reporting?

Yes. So look, I think there's a sort of – there's two things here that I think are important. One is that there is a macro, and we're not – we see some softness, but certainly not to the extent that I've heard across the tape. Today, we're very focused and we have been as you know, on high quality subscribers. Our audience, if you think about the most valuable audience today in television, it's male, 18 to 49. And we fall in the 40 to 42 range, which is also, I would say, the youngest in terms of just even the virtual MVPD. So we have a very upscale audience, tech savvy. They're paying $70 plus for our service, which means that for a similar – I would say a CPM basis for free service or free ad supported service. People are not spending on premium products on those platforms that are free. So we have a very upscale consumer. We're very confident. What I am disappointed about though, is that we spent more time than I had anticipated trying to understand some of the architecture that would require – that would allow us to actually optimize monetization over the next 12 to 18 months. So if I look at some of the scalability items that we were not able to deliver against this quarter, which I felt, we would've had by now in advance of football season. I think there's a pretty significant room for growth. So on the one hand, I'm very bullish. Of course, there is that uncertainty, but I can't say that we have felt any of that to date and all of this right now is in our control, which makes me very excited about the next couple quarters.

And Laura, I don't know if you keep a grid, but just for context, when you think about our 32% growth, clearly that means most and not all of our categories actually posted growth. But from a categorical perspective, I'd say telecom and insurance where I say the two strongest categories, and then relatively speaking streaming services, tech and CPG are on the lower end.

Thank you very much.

We'll take our next question from Shweta Khajuria with Evercore ISI.

Okay. Thank you very much. I guess my question is a follow-up to the prior question. Could you talk a little bit about ARPU trends? And then is your thought in terms of path to your long-term target still? Does it still hold or has that changed? But really in the quarter and the quarter-to-date, what have you seen and what is driving it? Thank you.

Shweta, I'll start. This is David. Look, we're still holding our long-term target, which is $15 to $20. Again, we are not monetizing our viewership and our audience to a degree where we think there's limited growth. I think that if we were able to implement some of the tech improvements that we're looking at around ad pod optimization, ad decisioning and a few other areas around addressability, we could have easily accomplished the 50%, 60% improvement relative to the number you see today. So I'm very comfortable with the $15 to $20. And just to give you some context for that number, if you look at just an old school traditional cable TV, if you look at just sort of the major players in that space, you'll see that their average ad ARPUs are still anywhere between, call it, $9 and $12. So if you layer on top of that addressability and Reed Hastings comments recently on $80 CPMs, we feel very comfortable that given our sports programming and our, I would say, high quality subscriber base targeting males 18 to 49, I think puts us in a really good position to be able to achieve those levels.

And Shweta, I would just add to that. In terms of the trends from a, call it, [dollar percentage specific basis]. If you look at the second quarter or let me give you the trends, right. 1Q we're at about $6.87 in terms of ad ARPU, 2Q was $7.25. The seasonality component will kick in, right. And so 3Q and 4Q will both be – show an improvement on an absolute basis. But also on a year-over-year growth basis, we should see improvement. And so if 2Q was down 18% or so year-over-year, 3Q and 4Q improve from there. And I'd like to think that by the time we get to the fourth quarter, we should be positive.

Yes. And then just the last thing on that note is there's a little bit of noise in that number, just given the fact that we've had somewhat of a mix shift in terms of customers. As you know, we very recently launched in Canada and we're starting to see some sub growth there. And so obviously that takes down the ad ARPU from North America. So still very healthy.

Okay. Thanks, David. Thank you, John.

You're welcome.

We'll take our next question from Darren Aftahi with ROTH Capital Partners.

Hey. This is Dillon on for Darren. Thanks for taking my questions. First, if I could touch on the subscriber acquisition cost side. Are you seeing any success in some lower channels, maybe even some organic growth that's helping drive down that sort of mixed cost for the new subs? And then as a follow-up with the content side of things. I know you had some agreements that were up for renewal. Just sort of an update on how you see those coming in the future and if you can get any more leverage to sort of lower the cost to the subscribers there? Thank you.

Yes. Okay, Dillon. That’s a good question. I think on the – let me start with the content side, you might be referring to the Univision deal. I think, look, we're in a situation where we're just – if you look at the guidance and where we are on the SRE line, you'll see that we're spending close to $750 million plus per year on content. And that's a pretty significant number if you are a media company in the United States facing a recession and inflation. So we're obviously looking to continue to improve our leverage in that line and we're having discussions. And I think one of the other things that we've done quite well is we're continuing to add FAST channels to dilute the number of cable networks in our package to ensure that we're continuing to increase the amount of ad inventory available. So I think, overall, this is obviously an area of extreme importance to us, but so far we're happy with the deals that we've renewed. And we think there's going to be some value and some of the additional value that we've received as part of these deals. But I'll let John touch on subscriber acquisition costs.

Yes. Let me hit a couple of things there on the SAC. And we don't put this in the number because it would distort it, but I'm actually pretty pleased as it relates to the percentage of subscribers that we get for zero SAC, right, meaning, call it, word of mouth or reactivations. That is not an insignificant number on a quarterly basis, so that's I think the good news and that's continuing. The second piece in terms of the SAC, call it, away from that. Look, the team continues to push hard on that and we continue to look at more efficient marketing channels. I don't want to get specific for obvious reasons, but I would say that people are really good about the range we've talked to in terms of, call it, 1x to 1.5x monthly ARPU. And I'd like to think that we could trend more often than not at the lower end of that.

Thank you very much.

We'll take our next question from Jed Kelly with Oppenheimer.

Hey. Great. Thanks for taking my question. First question, and then I have a follow-up. Just circling back on the wager opportunity and the partnerships you're thinking of potentially exploring. I mean, can you talk about how those talks are progressing and the potential opportunity to integrate platforms and – because I do think with your product, it would drive good stickiness for a wagering platform. So can you talk about how those partnerships are progressing?

Yes. Hey, Jed. This is David. Well, I think the first thing is you'll see some of those product treatments I believe on Investor Day. We plan to show you some of those. What you will find and I'll quote one, I would say, I don't want to say a prospective partner candidate, if you will, that they said they have never seen anything like the types of integrations that we are doing or we’re planning to do for our fubo gaming. Now to be clear, we'll still do that for fubo gaming in New Jersey, assuming we receive the final go ahead from the DGE. And so right now, those we're very early in those conversations, but I think the key message to investors is we're not planning to go out and actually launch 11 markets as we – given the market access deals we did. So we are looking for partners. We will slow roll until we find the right partner. But we're having conversations, I would say we're pretty early on and we'll keep you guys updated as information becomes available.

Got it. And then I guess, just a follow-up to that. I mean, would a potential partnership allow you to get like more sports content where a [indiscernible] could potentially use fuboTV to bring the sportsbook interactive experience to a person's home. And then my other question was given what we're seeing with bringing college football, especially around the Big 10 [indiscernible] media rights and sports are going up. We're often seeing it. The NBA contract is going to be pretty high as well. So can you talk about how you're kind of viewing future negotiations with some of your largest content providers? Thank you.

Thanks Jed. I want to start. Look, it's a very complicated situation. As you know, you have a proliferation of streaming services, which are further fragmenting the market. And so again, I just mentioned, the number of services that consumers are stacking, you're going to see a lot of leakage, right. You're going to see less ad revenue generated because people can't find games. People will miss games. You're going to see fewer subscribers because people can only subscribe to so many things. So I think we're in a good position. As you recall, 96% of our viewership is sports. Most people subscribe to fubo obviously because they watch linear TV, but more importantly, it's because of the sports product that we offer and the breadth of sports content that we have. So I'm of the view that consumers will continue to choose fubo over other services. And at the same time, we continue to have conversations with different leagues on different capabilities. And I think it's important to stay in front of consumers and to offer them integrated features to really sort of allow them to lean in. So I'm not concerned as much on increased pricing. In fact, I would say increased pricing on sports will probably guarantee the fact that a lot of these media companies are going to have to maintain their relationship with us given how much we're already spending on content. So I'm actually quite bullish on our business overall just given the fact that streaming – I would say media companies are migrating or shifting the paradigm to streaming, but at the same time, I think, you know this very well, they're shifting from lower churn to higher churn services and from higher margin to lower margin services. So in an environment where a content cost, particularly around sports continues to increase, I think we're very well positioned to continue to help them – media companies to optimize monetization.

Thank you.

Our next question comes from Nick Zangler with Stephens.

Yes. Hey guys. I'm curious could you talk about your exposure to political ad spent? We saw a few broadcasters report recently and they've discussed some strength here, thus far in 2Q with more expected 3Q and 4Q. So just curious if this was impactful for you in the quarter and your thoughts going forward?

Yes. This is John. I'll start with that one. So for the second quarter, we didn't get too much political. Clearly, it's still early. I would tell you to start the third quarter, the money is trickling in. And I think from an expectation perspective, I would tell you we're bullish on it. All signs suggest that it's going to be big. For us, I would say it ends up being, call it a single-digit percentage of the total, but probably somewhere in the mid to high singles for the back half of the year.

Great. And then where are you guys in terms of forming direct relationships with advertisers and agencies as opposed to the programmatic sales route? And with the relationships that you do have, I'm just curious if you're hearing any shifts or concerns for maybe ad spend in the back half of the year from these, again from any of those direct relationships specifically?

Sure. Why don't I take that? So just to provide some final color on political, I think it actually segue very well into your question. Third and fourth quarter, you're looking at not only the NFL college football, but you also have the world cup for the first time in the fourth quarter, which will put a significant amount of pressure on inventory avails, which I think could potentially drive up political rates even further. And so – and that in turn will also drive up just a regular, I would say advertising spend for non-political advertisers because there's just not enough inventory. As it relates to just the macro, I think we're very lucky to be a sports-first platform. So we're going to see some strong tailwinds, I believe in the back half of the year around sports in general. So I think as budgets get cut, folks will be cutting areas where they feel they can create more value for themselves. And sports is very difficult to bypass, whereas fungible entertainment content, you could probably find lower CPM levels. So I think overall, we're still pretty bullish on third and fourth quarter. We haven't really seen anything that would suggest some significant softness. Of course, I did mention earlier there is some softness, but not enough to make us revise our advertising position.

Yes. But I would just add actually to David's point. I recently had talked to our folks on the political side. And if you look at the floors that we're getting or asking for on the political sides, they're far, far above our average CPM today. And so that also again makes you feel pretty bullish about what that can mean across the platform. And then to David's point also on the NFL and sports, I can tell you, we have been approached by, call it, potential partners to get access to our sports inventory because it's so valuable.

That’s helpful. One last question here, just general thoughts on implications of the Apples, the Amazons, maybe Netflix is acquiring sports content because when big tech streaming services take these rights, it seems as though that content is then exclusively served. So maybe you can just respond to that and maybe if you see an opportunity to work with these guys, just general thoughts on what seems to be a trend here? Thanks.

Yes. I'll take that one. Look, this has been the, I would say the bear position on fubo for seven years maybe now, six and a half, seven years. Is that – the question about what about Amazon, what about Apple? So let me tell you something about Apple. Most recently they acquired the rights to Major League Soccer. And if you read their press release very closely, you'll note that not only does the company with over a 1 billion devices issue a press release on the MLS, but what they said within that press release is that this content will be available on other platforms like Vizio and LG, et cetera. That tells you that it's very difficult for even the largest companies in the world to maximize the value of any one piece of content. We are very excited about the opportunity to work with some of these partners. Obviously, I can't say much more than that, but we have had, I would say early discussions with some of the folks that you've mentioned as far as what is the art of possible, in terms of leveraging our audience, leveraging some of our other capabilities, but again, we believe the aggregated model is probably the most effective and most efficient model that you will find in media. One that has proven to be extremely profitable for both media company and distributor and at the same time has certainly created a lot of value for the consumer. And the last thing I'll just say on that note is that I don't think the TV model was ever broken. I don't remember anyone ever saying that, “hey, I don't like the TV experience.” What people have always been concerned about is the cost of the bundle. And what we've been able to accomplish in streaming is really create a wonderful experience that continues to improve over time on the streaming side. And with the stacking of services that consumers are currently experiencing, we feel that the market is quickly evolving in our direction more so today than we thought a year or two ago.

Great stuff. Thanks guys. Appreciate it.

Awesome. Thank you.

And that does conclude today's presentation. Thank you for your participation, and you may disconnect.