FuboTV Inc. Q4 FY2024 earnings call

• 2024 was a record year for fuboTV Inc. with double-digit revenue growth in North America, closing the year with ~$1.6 billion in total revenue, up 19% year over year, and paid subscribers in North America at 1,676,000, up 4% year over year.
• In Q4, North America total revenue was ~$434 million, up 8% year over year, and ARPU was a record $87.90.
• Improved full-year adjusted EBITDA and free cash flow by over $100 million for the second consecutive year.
• Announced a definitive agreement with The Walt Disney Company to combine Hulu + Live TV, making fuboTV Inc. the sixth largest player in the pay TV space by subscribers.
• Launched a Z Family bundle of 18 linear channels serving the South Asian demographic. Lowered the price of the Latino plan by 55% after not renewing Univision due to significant rate increases.
• Q4 net loss improved to $40.9 million compared to $71 million in Q4 2023; adjusted EBITDA loss was $8.7 million vs. $50.1 million in Q4 2023; free cash flow was positive $16.3 million, a $22.1 million improvement year over year.

In North America, total revenue in Q4 was approximately $434 million, up 8% year over year, with 1,676,000 paid subscribers, up 4% year over year. Average revenue per user (ARPU) in North America was $87.90 in Q4, an expansion of 1.4% year over year. Rest of world revenue grew 12% in Q4, with 362,000 subscribers and ARPU of $8.50. Global ad revenue was $34.4 million, down 11.8% year over year due to content portfolio adjustments in 2024. North America contributed significantly to revenue, with total revenue for the full year 2024 closing just shy of $1.6 billion, up 19% year over year, and paid subscribers in North America hitting 1,676,000, up 4% year over year.

• First quarter North America subscriber guidance: 1,430,000 to 1,460,000 subscribers (4% year-over-year decline at midpoint), revenue guidance: $400 million to $410 million (3% year-over-year growth at midpoint).
• Rest of world subscriber guidance: 330,000 to 340,000 subscribers (16% year-over-year decline at midpoint), revenue guidance: $7.5 million to $8.5 million (5% year-over-year decline at midpoint), reflecting the impact of programming shifts.

Q: With your pending Disney relationship and with Disney's ESPN possibly opting out of Major League Baseball after next year, what is the opportunity for fuboTV Inc. going forward with those rights? And related to that, how would you manage any type of programming conflicts between ESPN flagship or the Disney offerings when they're still going to be partners with you on the renewal MVPDs?

A: Yeah, thank you. Why don't I take this one, John? So, obviously, we attempt to partner with all of the programmers out in the market, as well as the leagues. So we have a relationship with Major League Baseball, but I think the primary goal is to continue distributing live channels. Should Major League Baseball decide to go in that direction, as it did managing some of the local sports teams such as the Padres, we will certainly look to figure out a way to work together. And then as for the second part of your question, yeah, we don't really see any issues at all with Disney. We're in the ordinary course. Yeah. We have a relationship. We have a licensing distribution deal with them, and that deal is over multiple years, and we'll continue to distribute Disney channels for the contract.

Q: I was wondering if you could talk about, like, maybe the relative pricing and content costs for, I guess, the core fuboTV Inc. service and the broadcast and sports service. Like, I just with a narrower offering, the relative importance of those networks and the potential for, I guess, the higher cost assigned there.

A: Hey, Pat. It's John. Maybe I'll start. On the pricing, like, I would say it's too soon to get specific, but I think it's fair to say that the difference will be significant on a percentage basis. And as we look to what potential subscribers are looking for, I think we have another opportunity to reach them along the demand curve. So I do think it should widen the funnel for us. Is there a second part? I may miss the second part of the question. Was that on programming cost or Yeah. Programming costs. Yeah. Look. Under auto programming costs, like, they're certainly gonna be lower. But I would just say give us another quarter or two to give you more context around that as we kinda get deeper into the offering.

Q: I was wondering if you could talk about, like, maybe the relative pricing and content costs for, I guess, the core fuboTV Inc. service and the broadcast and sports service. Like, I just with a narrower offering, the relative importance of those networks and the potential for, I guess, the higher cost assigned there.

A: Hey, Pat. It's John. Maybe I'll start. On the pricing, like, I would say it's too soon to get specific, but I think it's fair to say that the difference will be significant on a percentage basis. And as we look to what potential subscribers are looking for, I think we have another opportunity to reach them along the demand curve. So I do think it should widen the funnel for us. Is there a second part? I may miss the second part of the question. Was that on programming cost or Yeah. Programming costs. Yeah. Look. Under auto programming costs, like, they're certainly gonna be lower. But I would just say give us another quarter or two to give you more context around that as we kinda get deeper into the offering.

Q: I was wondering if you could talk about, like, maybe the relative pricing and content costs for, I guess, the core fuboTV Inc. service and the broadcast and sports service. Like, I just with a narrower offering, the relative importance of those networks and the potential for, I guess, the higher cost assigned there.

A: Hey, Pat. It's John. Maybe I'll start. On the pricing, like, I would say it's too soon to get specific, but I think it's fair to say that the difference will be significant on a percentage basis. And as we look to what potential subscribers are looking for, I think we have another opportunity to reach them along the demand curve. So I do think it should widen the funnel for us. Is there a second part? I may miss the second part of the question. Was that on programming cost or Yeah. Programming costs. Yeah. Look. Under auto programming costs, like, they're certainly gonna be lower. But I would just say give us another quarter or two to give you more context around that as we kinda get deeper into the offering.

Q: The first one is on these, the Z Family is sort of an interesting sort of pivot away from sports for you guys. Do you see that as mostly an upsell opportunity for existing subs, or do you think that could be a whole new TAM for you? And if so, how big could that be as an onboarding process to new subscribers that maybe would have been additive to the sports-focused subscribers.

A: Hi, Laura. This is David. Look, I wouldn't say we're moving away from sports. Not at all. You know, I think we announced last year the addition of cricket to our sports offering. And so this was a natural extension. As John just stated, our goal is really to attract customers along the demand curve. This expands our funnel and also fits very well with our super aggregation strategy. So we want to provide slimmer bundles of programming. And the way we've been sort of developing our product, we think that we're gonna have some very interesting capabilities around upselling consumers once we get them in. And I think over the years, we've built an excellent trap on the platform where we've attracted customers through sports and been able to drive monetization through entertainment. This is similar in strategy. So we're excited to sort of test that out. Potentially, there could be lower acquisition costs, better retention, and, overall, we're very happy with where we are today. The business is significantly healthier than it's ever been.

Q: Can we drill down on advertising a little bit? Really, and you had these intriguing words in the press release talking about you expanded your suite of ad formats with dynamic and could you talk about what's going on with advertising and how you see advertising unfolding in 2025? Is there CPM pressure in your world? Down with CPM pressure. And could you just sort of drill down into the app, what's going on with the advertising piece in the fourth quarter and into the first quarter here.

A: Yeah. Yeah. Sure, Laura. I'll start. Look, on the fourth quarter, I would say results were impacted by both the drop of Discovery and Univision. And so I'd say adjusting for those, we performed at, say, likely more so in line with the broader marketplace. But in terms of what we saw during the quarter, I would say our direct business was up double digits as you'd expect led by the sports vertical. On the pricing front, I would say that sports remain healthy. On this pricing and sell out, but we are seeing some relative weakness or softness in entertainment as it relates to CPMs. I would say anecdotally, we did see some uncertainty in the market post the election. I said that continued into the first quarter. Heading into March, I see our team feels like the tone has improved somewhat. So from a growth perspective, I'd say March should look better than February. And maybe at least directionally, although it's early. We're starting to see some good early interest as it relates to the 2025 upfront.

Q: I just have one. John, you were talking about mid-single-digit growth for Q1 and Q4 not being very different. I know there were some headwinds from Univision and Discovery throughout the year. But if we sort of pull back and take a bigger pay view of your growth relative to industry. We've seen deceleration over the last two years in both. And I'm curious, one, if you and David could sort of provide some thoughts around the slowdown, what's happening? Are we hitting, perhaps a dead rock level of sports enthusiasts and traditional cable? Or maybe more importantly, what are the avenues for sort of reaccelerate the migration rate as we go forward? Do we need price and package adjustments? And if so, how do you guys think about being able to offer something sort of different and better later in the year?

A: Yeah. Sorry. There was a lot in that question, so let me see if I can break that down a little bit. So, in terms of the deceleration, I think the United States is a relatively mature market. You have about 70 million households between traditional pay TV and virtual, of which, I would say the traditional side probably represents around 50 million or so. So for us, we still think that there's pretty significant growth. The streaming side, the SVOD side of the business, I think, is also a which I think bodes well for fuboTV Inc. and the virtual MVPD space in general. There's still a strong secular tailwind of consumers moving from traditional cable to streaming. But what I think has changed dramatically over the last 24 months is the number of ad-supported services coming out of the likes of Netflix and other SVOD services. So what I think has happened is over the last four or five years, seen sort of an escalation of about 7% growth or I should say cost or pricing from these SVOD services, which is almost in line with the type of escalators that we've seen over the last five or six years in the virtual MVPD space. But our product is becoming more competitive. There's fewer programming. TV shows or I think they're more sparse on SVOD services. Our programming, we continue to maintain about 100 or so hours of viewership. So I think it's just a more competitive product and, you know, we've done an excellent job getting people to convert. You may have also noticed we've reduced our marketing spend as a percentage of revenue over the last couple of years. And so we've really been focused on ensuring that we have a healthy business. And fourth-quarter cash flow clearly highlights the fact that we are still on track to deliver 2025, as we said, back then, but I think it's a I think people are probably having a much harder time now deciding whether they should go to an SVOD service or, you know, look at a Pay TV platform or streaming TV platform like fuboTV Inc. Ultimately, when you aggregate the cost of three or four of these services without ad products, you're getting into the sort of $100 price point. So, I think over time, we're gonna be a little bit more competitive with those services. And as I said in my opening comments, you know, this an aggregated streaming service probably provides the best value for consumers, it provides the best value for media companies, and, you know, it allows us to maintain lower churn, it allows media companies to reduce the amount of marketing they're spending, and allows everybody to take advantage of sparse hits from each of these different media providers.

Q: Hey, guys. Good morning. How's it going? Thanks for taking the question. So I believe this should be the first kind of seasonal roll-off quarter where you have the fuboTV Inc. free tier active. So can you discuss any early insights there on how that's worked as a retention tool? And longer term, if you have any update to your thinking about if you would move the free tier in front of the paywall at some point.

A: Yeah. I think the one major point that we've seen through the free tier is the improved reactivation rates. Frankly, I think if you exclude the December COVID month, I think December was our best retention month in the history of the company. So, you know, we're continuing to work on the different tiers that we have and, you know, obviously, we're starting to feel pretty good about where we are. Payback periods are coming down. Retention is improving, which, by the way, not an easy task when you know, you remove a significant number of channels from the platform in a very short period of time. So again, we're very excited about the future and, you know, we think we're well-positioned for growth when we're ready. But as John said, it's really about sustainable growth going forward.

Q: Yeah. Just a quickie. John, on the operating expenses, there were some dips and doodles in terms of the categories. Like, G&A was down a lot. Was there any I haven't been through every document here. Is there anything unusual particularly in that line in the quarter?

A: Yeah, Doug. Thanks for the question. So to your point, on that line item, there were some ins and outs. I would tell you that on a run rate basis, it's probably more like a low double-digit million type of number for 2025. And so maybe there is a few million dollars in that benefit in the fourth quarter. You know, to David's comment before, I would just add that if we look at the other cost buckets, we saw an absolute improvement, if you will, year over year on a dollar basis. That they come across both marketing. We would have seen that in tech and dev, if not for some capitalized costs. And we also saw that in B&T. So the operating leverage continues to be moving in the right direction. I would just add, Nati, that you mentioned this, but since you're talking about the expenses, I would like to say that, you know, from a broader perspective, like, the team has been hyper-focused on balancing our investment in the business and reaching those cash flow targets. And so, you know, our incremental adjusted EBITDA margins were, call it, 34% in 2023 and then 45% in 2024. And so I do think even with the ins and outs, the incremental markets on the business and cash flow improvements are still very significant.