Good morning. My name is Dennis, and I will be your conference operator today. At this time, I would like to welcome everyone to the Fubo First Quarter 2024 Earnings Conference Call. [Operator Instructions] I would now like to turn the conference over to Alison Sternberg, Senior Vice President of Investor Relations at Fubo. Please go ahead.

Thank you for joining us to discuss Fubo's first quarter 2024. 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 full year and Fubo strategy, and John will cover the financials and guidance. Then we will turn the call over to the analysts for Q&A. I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding our financial condition, anticipated financial performance, business strategy and plans, industry and consumer trends, anticompetitive practices among our competitors and our response plan, including our antitrust lawsuit and expectations regarding profitability. These forward-looking statements are subject to certain risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from forward-looking statements include those discussed in our filings with the SEC. Except as otherwise noted, the results and guidance we are presenting today are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as discontinued operations. During the call, we may also refer to certain non-GAAP financial measures. Reconciliations of these non-GAAP measures to the most directly comparable GAAP measures are also available in our Q1 2024 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. Good morning, and thank you all for joining us today to discuss Fubo's first quarter 2024 results. We are very pleased with our strong start to 2024. Fubo again, exceeded guidance with double-digit growth across key financial and operating metrics in North America during the first quarter. We ended the quarter with $394 million in total revenue, up 24% year-over-year and paid subscribers at $1,511,000, up 18% year-over-year. Our ad sales business continues to be an expanding revenue source for Fubo. In Q1, we delivered North American ad revenue of $27.2 million, an increase of 21% year-over-year, demonstrating an accelerating business. We are also pleased to report that the first quarter marked yet another period of steady progress towards achieving positive cash flow and adjusted EBITDA. In Q1, adjusted EBITDA margin reached minus 10%, representing a significant improvement of 796 basis points or an increase of approximately $18 million in absolute dollars compared to the first quarter of 2023. Additionally, Q1 represents the fifth consecutive quarter of year-over-year improvements in free cash flow and adjusted EBITDA, underscoring our forward momentum in the right direction. Notably, we've grown our market share in the pay TV space since our October 2020 listing on the NYSE. In Q1, we achieved our lowest subscriber acquisition cost to average revenue per user ratio or SAC to ARPU ratio, well below the low end of our target range of 1 to 1.5x. This demonstrates our increased efficiency in customer acquisition. Additionally, March 2024 represented the lowest churn rate for any March on record for the company. These results are demonstrative of Fubo's continued ability to grow quickly, efficiently and effectively since our 2015 founding, performing well against benchmark companies across the media and tech sectors. While these statistics are impressive when comparing our…

Thank you, David, and good morning, everyone. I am pleased with our ability to deliver another quarter of strong results, including top line growth and continued improvement across just about every key performance indicator. The first quarter results serve as support that our operational initiatives around bringing added effectiveness and efficiency to the business are working and that our customer acquisition and retention actions are also having a positive impact. Above all, the results over the past few quarters provide further evidence that our business model positions us well for continued growth. Taking a look at the results for the quarter. We continue to see healthy top line and subscriber growth, with global revenue growing by over 24% to $402.3 million, driven by 24% growth in North America and 7% growth in Rest of World. We are also pleased with our overall subscriber growth, including 18% growth in North America to 1.51 million subscribers and a 5% increase in rest of world subscribers. Our progress is not only reflected in our revenue and subscriber growth, but across key performance metrics as well. As an example, we continue to gain added leverage over our subscriber-related expenses, which decreased from 93% to 90% of revenue in Q1. We expect this trend to continue as we work to grow subscribers, further optimize our pricing and continue to fine-tune our cost structure and mix of premium plans. In addition, ARPU in North America improved to $84.54, a meaningful improvement compared to $76.79 in the prior year period. We also saw an improvement in ARPU in our rest of Rail business to $7 from $6.57. Importantly, we expect this trend in year-over-year ARPU improvement to continue. As it relates to some of the key revenue drivers, let me turn to our advertising business, a segment…

[Operator Instructions] Your first question is from the line of Laura Martin with Needham.

Could you first talk on churn lower and customer acquisition costs lower. Could you talk about what's driving that, please?

Laura, this is John. I'll start. So, in terms of SAC, what I would say is our marketing team has just done an amazing job -- and so we saw -- it's a reasonably good improvement in churn for the quarter. Our SAC is the lowest it's been, I think, in the history as it relates to a multiple. And so, I think we feel pretty good about it. I would say they've done a really good job of spending at the right time and moving budget around. And I guess that's an that anything else...

Yes. Yes, look, the team has done, I would say, a phenomenal job making sure that we're able to retain that fall cohort. And we've been able to find some overlap with other sports programming and entertainment program. And I think one of the unexpected positives in the quarter was the impact of women's college basketball. That was certainly a driver that we didn't anticipate. At the same time, as you know, we didn't have TNT and so we -- there was no real impact from the lack of coverage on the men's side.

Okay. That's helpful. And then advertising very strong in the quarter. Would you actually relate that to a better -- like you've got the sales force in order? Are you doing better programmatic, very strong ad numbers, which is really helpful to margins. Could you talk about those trends and whether you see them continuing and accelerating...

Yes. We're very focused on our advertising business, and we've strategically invested in our monetization capabilities. As I just mentioned, we're focused on releasing new ad formats to drive value. And I think one of the key pieces of that is our focus on banner ads. As you know, Roku does a phenomenal job selling banner ads on its platform. And we finally productized our new unit, which we call the Marquee, which is prominently displayed on our home page. We've also focused on ensuring that we're meeting the needs of our many advertisers, and we're specifically responding this quarter and next quarter to the growing issues around fragmentation of the media landscape. And so, we've currently signed an agreement with comScore to provide more cross-platform measurements for advertisers. And I think one thing that you and I have talked about several times, I think, throughout the year, what was the importance of the deprecation of third-party cookies on Google side. And so, we've also locked in a deal with TransUnion to pend demo data to the Fubo subscriber and household information. So, we're very focused on advertising. We're focused on new units. -- the banners are actually quite interesting because it doesn't require any improvement in engagement. Although engagement already is very high. On average, our customers are watching over 5 hours per day and on a monthly average, just north of 100 hours, engagement's up about 2%, I believe, year-over-year. So, all that really speaks to our excitement around advertising. We've gone to market. Our go-to-market strategy continues to be strong. We have an audience that has really high discretionary income. As you know, our subscribers pay call it, $80-plus per month. And we're looking forward to continuing to drive our advertising business. We're very confident about that.

Yes. And Laura, I would actually add a couple of points there, too. And I think you touched on it, but our new leadership team started actually exactly a year ago this week. And there was instantaneous type of response to them. And so for 3Q of last year, we grew advertising 34%, and then 4Q was in the mid-teens. And then as you noted, this quarter was plus 21%. And I would say we like what we're seeing as it relates to how April ended up. And I'd say there is a little more visibility today looking ahead versus last quarter looking ahead.

Your next question is from the line of Jian Li with Evercore ISI.

Great... This is Jay with Evercore. So first on just the North America Sabka for the year. I understand that JV impact is not baked in. And how much of the current license negotiation headwind are you factoring in with the discovery coming offline? And any other sort of major content up for renewal that we should keep in mind?

Yes. I'll start, this is John. So in terms of specific content renewals, we don't disclose those. What I've said and we said historically is that we have 1 or 2 a year, clearly, the discovery one was the most recent one. As it relates to the outlook, what I would say is simply that, look, we've never actually disclosed or talk to specific deals in terms of subscriber impact. But what I can tell you is that the -- our full year outlook and also our second quarter outlook does assume an impact from that drop.

Great. That's very clear. And the second one is given just the strong customer acquisition efficiency you're seeing and the tailwind in advertising, would you consider like maintaining at this level or actually leaning a bit more into your target range of fact to LTV?

Sorry, what was that? Are you saying leaning more into what...

Into customer acquisition, just given that you're seeing this tailwind in ARPU distribution advertising.

Yes, very good question. Look, I think our goal from the onset has been about achieving profitability in 2025. And as you know, in subscriber models, marketing is an expense that you have to incur today with potential value created over time. And so we just don't have that much room for us to be able to do that, make those kind of investments. However, you are correct. With this type of efficient acquisition cost under normal circumstances, we would certainly want to invest now versus later. So that makes a lot of sense. But again, we're very measured and very disciplined with a key focus on achieving profitability as we've planned.

Your next question is from the line of David Joyce with Seaport Research Partners.

You had some significant outflows of cash in the first quarter, even though free cash flow was trending a bit better. Could you help us understand, was that just an unusually heavy quarter because you were standing up this Fubo free tier and you're prepping us the technology for the new the new ad units that were unveiled at the NewFronts.

Yes, David, this is John. Thanks for the question. Look, I'd start by saying that our cash usage is highly seasonal, I think, as you know. And so 1Q was our highest cash use quarter as a result of that. But I'd say going back to our Investor Day in August 22, what I said was that we would see improving cash usage on a year-over-year basis going forward. And that's what we've done. So, for modeling purpose, I would not use 1Q as a run rate. And I would also add that 1Q cash usage came in better than our internal forecast. And so, for the rest of the year, cash usage will improve on an absolute basis. And then as a reminder, I'd say, our cash usage in the fourth quarter of last year was very modest. So, there's nothing to call out in terms of investments for the quarter. And I would add that our investment too premium, again, was very modest.

And are there other products that you're still working on, on the advertising front beyond what was announced this week?

Yes. Look, I think this was our first full year of actually really focused on monetization. These are significant number of units that we've just released -- there are other areas that we're focused on. And there are some things that we're really looking at sort of very forward-looking opportunities. And the use of AI to me is an area that I think we can really have positive impacts on monetization. So, think about a situation where the AI can actually read what's happening on screen at the end of an episode or whatever content you're watching and to be able to then call an ad that is relevant to that piece of content that you just watch. So, we think that there's many, many areas in which we can continue to innovate around monetization, particularly around ad units and ad capabilities. And obviously, data becomes a key component of that. And I think what's most important Put the engagement level of the platform is extremely high, which is really sort of an area that most advertisers are focused on high-quality content, high levels of engagement. I believe Netflix has also highlighted the fact that engagement is a key area in which they're focused to really drive advertising interest and brand awareness.

Your next question is from the line of Darren Aftahi with ROTH MKM.

If I may. Just can you kind of give your thoughts on the free tier ahead of the launch later this year? And then just talk about the SaaS channel. I think you guys said you have 16 channels now, just the contribution to the ad business today and how that may change going forward.

Yes. Darren, this is David. Look, I would say a year ago, maybe 1.5 years ago, we started adding fast channels behind our paywall. And I can tell you, they've actually performed quite well. Just looking at the most recent numbers, I think that fast channels now account for about 9% of viewing. So roughly, call it, 9 hours. I mean, that's a tremendous amount of hours for content that some folks believe may not be as high quality as cable content. So, we're -- we've been sort of monitoring that very closely. Part of that calculus is tied to our discovery negotiation. We've attempted to negotiate in good faith with them. As you know, that didn't really work out very well. But the fast channels have really absorbed some of that viewing. So, we're very happy about that. And with the number of trials that are coming into the platform and people testing the service, we also want to make sure that we are engaging consumers along the demand curve. And so having that free tier, we think, will allow us to continue to monetize users both in the sort of -- in the subscription realm as well as when they're pausing their subscriptions and waiting for the next sport season to start. So again, we're very bullish on that. As we've just said, we're very focused on introducing new advertising units, interactive ad units, and we're going to do our best to continue to monetize that. And as you know, we have a goal of really growing our ad ARPU, and this sort of helps us get to that next level.

And Darren, I would just add a couple of things and metrics as it relates to that, that may help you a bit in terms of thinking about the opportunity -- for March, on the fast channel side, hours per sub far over indexed our growth in overall sales in terms of the Fubo platform. The fill rate was, I'd say, fairly consistent with the overall for the company and broadcasting transmission despite that significant increase in ours and also channels was actually down year-over-year. So from a profit perspective, it's turning into a pretty good profit driver for the company.

Your next question is from the line of James Goss with Barrington Research.

Okay. A couple of things. First, in terms of the personalized DVR strategy and playlists, clearly, the technology is there. Is the issue that there is an unwillingness to provide the rights to do the sort of things you're trying to do? Or are the -- is the incremental rights fee so high that there is not room for negotiation or something else? And I talk about that? And then my second question would be Molotov was noted to have a $7 ARPU and -- and it seems like it's a fairly robust service and an important brand in France and in the European Union. I wonder what are the issues there in terms of competitiveness and the potential for a higher price point on that service, which is not very largely penetrated at this point.

Yes, sure. I think I'll see if I can answer all of your questions. With respect to the playlist services, well, this is a sort of a very unique feature. Recall that this is a DVR feature. So, this is within the realm of what consumers control they own. And we've built this feature in a way, and I think we referred to it earlier as a user control. This is user initiated. It's a user control. It's a way to really increase engagement and give our subscribers the control within their DVR to really watch things that are exciting to them, relevant to them and then sort of improve their user experience. So again, I'm not sure that there's anything that needs to be discussed with any of the programs given the fact that it is within the DVR. That being said, there obviously are difficulties in our ability to reach our programmers in a way that allows us to really maximize the service. And our goal has always been to improve our service for consumers as well as ensure that the -- that we're driving tune-in for their programming and obviously, the lead IP. So we'll continue to do that. We'll look for ways to be able to work within our agreements, and I think this is our first attempt to do that. And I will mention as part of our alleged claims is the fact that we are unable to offer features that others offer, as you know, YouTube TV offers highlights. And Hulu has stacking rights, which we don't have. And other distributors are allowed to offer ESPN Plus as part of their service. So we're dealing with it the best we can. But again, we believe that we're really focused on consumer quality and building…

Okay. Now that covers it for now.

our next question is from the line of Brett Knoblauch with Cantor Fitzgerald.

On the Warner Bros discovery, I guess, contract negotiations. I was just curious from a pricing perspective now that I guess you're not going to be paying those distribution fees. Will that alter your pricing strategy? Or is that something where you're going to leave pricing the same and the savings will flow to the bottom line?

Yes. Well, as you know, it's not like we have that much room in our current pricing. We have been under pressure by the defendants for a long period of time. We're dealing with pernicious tactics that they continue to apply on our business, onerous terms that make it quite difficult for us to reach profitability quickly. And so at this point in time, we believe our pricing will remain status quo and this should flow to the bottom line.

And is it possible for you to quantify the savings fees from that, I guess, termination of service?

Yes. Well, I think the short answer is we don't disclose our content deals and the impact of those content deals on our business. But I'm sure you would probably see that reflected in the next quarter or begin to be reflected in the next quarter.

Thank you all for your questions. I will now turn the call back to Alison Sternberg.

Thank you, everybody, for your thoughtful questions this morning. Before we conclude, I did want to take one question from our SA shareholder portal. This -- I'm going to direct to you, David. The question is what measures is the company currently taking to ensure sustainable long-term growth and shareholder value creation.

Thank you, Alison. Well, I think it's been evident over the last 5 quarters that we are really focused on creating shareholder value. And we've been very focused on cost cutting. If you look at our operating leverage, you'll note that the 2 key areas, gross margin drivers are subscriber-related expenses, which is down this year year-over-year as well as continued improvement on our broadcasting and transmission lines. So those 2 lines are continuing to help drive operational costs down, leading to greater value. And then we've been really focused on doubling down on our content strategy. As you see, we're very much sports first. We have over 35 regional sports networks. We're continuing to look for more content opportunities in that area. We're very focused on continuing to develop our technology and product capabilities, featuring our AI-powered capabilities. And you'll probably see more of that as the team starts to experiment with more features. And then in terms of reach and distribution, we're looking to continue to drive engagement across the demand curve, as I just mentioned. And we're looking forward to the forthcoming 3 tier that will be launched in the next couple of quarters.

Excellent. Thank you, David. Back to you, operator.

This concludes today's Fubo First Quarter 2024 Earnings Call. Thank you all for joining. You may now disconnect.