FUBO - NYSE

Thank you for standing by. My name is Kate, and I will be your conference operator today. At this time, I would like to welcome everyone to Fubo 2Q '25 Earnings Call. [Operator Instructions] I would now like to turn the call over to Ameet Padte, SVP, FP&A, Corporate Development and Investor Relations. Please go ahead.

Thank you for joining us to discuss Fubo's second quarter 2025 results. With me today is David Gandler, Co-Founder and CEO of Fubo; and John Janedis, CFO of Fubo. Full details of our results and additional management commentary are available in our earnings release and letter to shareholders, which can be found on the Investor Relations section of our website at ir.fubo.tv. Before we begin, let me quickly review the format of today's call. David will start with some brief remarks on the quarter and our business, and John will cover the financials. Then we will turn the call over to the analysts for Q&A. I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of the federal securities laws, including, but not limited to, statements regarding our financial condition, anticipated financial performance, business strategy and plans, including our pending business combination and our products and subscription packages, market, industry and consumer trends and expectations regarding growth and profitability. These forward-looking statements are subject to certain risks, uncertainties and assumptions. Important factors that could cause actual results to differ materially from forward-looking statements are discussed in our SEC filings. Except as otherwise noted, the results we are presenting today are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as discontinued operations. 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 Q2 2025 earnings shareholder letter, which is available on our website at ir.fubo.tv. Please note as well that during Q&A, the company will not provide any information related to the pending business combination with Hulu+ Live TV, and ongoing regulatory matters beyond what we have already shared. With that, I will turn the call over to David.

Thank you, Ameet, and good morning, everyone. We appreciate you joining us today to discuss Fubo's second quarter 2025 results. We are pleased to report that the second quarter represented Fubo's first quarter of positive adjusted EBITDA, an important milestone for our business. This achievement is the result of Fubo's focused execution, our ability to deliver on consumer needs and our commitment to value and relevance despite a fragmented and friction-filled streaming marketplace. Our global streaming business exceeded both revenue and subscriber expectations in the second quarter. In North America, we delivered total revenue of $371 million, down 3% year-over-year and 1,356,000 paid subscribers, down 6.5% year-over-year. In the Rest of World, we closed the quarter with total revenue of $8.7 million, up 4.7% year-over-year and 349,000 paid subscribers, down 12.5% year-over-year. We have filed a preliminary proxy statement seeking shareholder approval of our agreement with the Walt Disney Company to combine Fubo with Hulu+ Live TV. As previously stated, we continue to be excited about the potential to increase competition and consumer choice in the pay-TV space. The anticipated time line to close this transaction is currently the fourth quarter of calendar year 2025 or the first quarter of calendar year 2026. Closing remains subject to regulatory approvals, Fubo shareholder approval and the satisfaction of other customary closing conditions. Fubo has a demonstrated history of fighting for consumer choice, and we continue to focus on super serving customers with flexible content options at appropriate price points. In the coming weeks, we will launch Fubo Sports, a skinny content service for sports fans. We look forward to sharing more details soon. Fubo's recent launch of pay-per-view further underscores our commitment to offering flexible content experiences. This new feature allows both subscribers and nonsubscribers to purchase access to premium live events, including boxing, wrestling and soccer on a one-off basis. By opening the door to a broader audience, Pay-Per-View not only expands Fubo's reach, but also creates a strategic pathway to convert casual viewers into monthly subscribers. Our strategy to introduce the Fubo experience to new audiences is exemplified by our recent content partnership with DA

Thank you, David. Our second quarter financial results reflect continued execution against our strategic priorities and profitability goals. Our performance once again demonstrates the value of our aggregated content model and technology-driven platform. As disclosed last week in the announcement of our preliminary second quarter 2025 results, the company meaningfully exceeded revenue and subscriber guidance. We delivered North America revenue of $371 million and North America paid subscribers of 1.36 million, and we are pleased with our ability to deliver outperformance in the second quarter versus expectations. Ad revenue in North America totaled $25.5 million, a 2% year-over-year decline, primarily due to the loss of certain ad-insertable content from Warner Bros. Discovery and TelevisaUnivision. Turning to Rest of World. Revenue was $8.7 million, and our subscriber count was 349,000 with both metrics also exceeding guidance. Net loss narrowed to $8 million or $0.02 per share compared to a loss of $25.8 million or $0.08 per share a year ago. We are also extremely pleased to report second quarter adjusted EBITDA of $20.7 million, an improvement of more than $30 million year- over-year. As David mentioned, this marks a major milestone as our first ever quarter of positive adjusted EBITDA. This underscores our ongoing focus on driving operating leverage in the model to best position the company for long-term growth. Net cash used in operating activities in the quarter was $34.6 million and free cash flow declined by $2.4 million year-over-year to negative $37.7 million. We ended the quarter with over $285 million in cash, cash equivalents and restricted cash, providing ample financial flexibility. In closing, I want to emphasize how proud we are of this quarter's performance and the momentum we've sustained. We are energized by what we believe we can achieve through our pending business combination with Hulu + Live TV and look forward to updating you on our progress. With that, I'll turn it over to the operator for Q&A.

[Operator Instructions] Your first question comes from the line of Patrick Sholl with Barrington Research.

Congrats on the EBITDA profitability. Just in terms of the third quarter, can you maybe just talk about some of the puts and takes and how we should formulate subscriber expectations for the quarter, just with the launch of products from competitors and near expected launch of a skinnier product? And with the competitive environment, how should we think about like the marketing efforts both to support -- to support your service relative to the traditional seasonal pattern?

Sure. Pat, maybe I'll start. This is John, and I think maybe David will jump in, too. But let me just start on July. Look, that finished in line in terms of the month with what we expected in terms of subscribers. What I would tell you, though, with the fall sports season starting soon, we would expect to see the typical seasonal uptick alongside of reactivations. In terms of puts and takes, we're mindful that the market is competitive. So the team spends a lot of time looking at SAC conversion and churn. David, I'm not sure you have much to add on that.

Yes. I would say, as you said on July, I think July, we're seeing some, I would say, relatively strong retention as it relates to our core English product. And because we've been so focused on more effective and efficient marketing, we believe that, that will lead to greater retention from this particular cohort going into the football season. And we're going to continue to maintain an effective and efficient approach to marketing in the third quarter because we do feel that there is that tailwind that we typically see in the season.

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

So David, I would like to go to the French acquisition. And the industrial logic there were not only were they great tech guys, but we also have really great like a free streaming service, and you're going to try to bring some of that know-how into Fubo to offer free -- can you update us on what's happening with the French assets? And were they -- did it actually come true? Did it actually, actually help you? Because I can't -- you haven't done that much with free services in front of the paywall in the end, right? So can you update us on whether the logic sort of worked there? And if not, why not? And if so, how?

Yes. Thank you, Laura. I think there were a few pieces to that acquisition that we talked about. One was our CTO, our current CTO led the Molotov streaming platform. So we've integrated the technology teams. We've been very focused on unifying our technology stack, which will give us a significant edge as we look to continue to drive value across the Rest of World. I know we've been very focused on France. But at the same time, as you know, we've been really focused on achieving our profitability targets. That has been the priority. But I will say in France that we're in the midst of discussing French property, sports properties, in particular, I still want to talk about the ones that we're in the process of negotiating, but we believe that there will be some significant sports rights that will likely come online in the coming few weeks. So we are very focused on that. I do believe that there's a significant opportunity there. The technology stack is now capable of handling multiple services that we develop. So I'm very bullish on that. The other thing is we haven't really provided Molotov with a lot of the ad technology that we've been developing over the last couple of years. And all of that, we believe, will become available to Molotov sometime in either end of fourth quarter or certainly around first quarter of 2026.

Interesting, David. And then the other one is, this is not you, this is me. Disney, in my opinion, has decided to collapse. They just told us that their launch of the new ESPN flagship service, ESPN+ is going to cost $30. And in that, you will get free Disney+ and Hulu. So they're collapsing all of their streaming services into this new ESPN flagship app. That's me. So my question for you is, theoretical only, if you had an open book with unlimited access to all sports, having nothing to do with Fubo's pass, but just a much broader range of sports and you could overlay your tech aspirations onto the consumer experience. What would you say would be the ideal sort of upgraded consumer experience over what's in the marketplace today to give your offering -- your go-to-market a competitive advantage?

Yes. Look, I think we've been very focused on 2 things. One, we wanted to develop a super aggregated service where we can comfortably sell stand-alone offerings, which we've started to do as well as a more broad sports offering, whether it's the service or the bundle. And I think that that's where we're still headed. We've seen a nice uptick on the stand-alone offers that we put out there. It's become very clear that consumers are very focused on spending less rather than more, and we see that in the data, at least across Latino and some of our stand-alone sorts bundles. But as it relates to a more broader opportunity, I do think that there continues to be a lot of fragmentation and confusion for consumers in the market. We will be implementing -- yes, actually, I think we implemented as of today and e-mails will be going out over the next few days, the authentication to ESPN+. But my sense is that a broader package will appeal to many people. Lots of folks don't have interest in looking for programming. They're not sure where it can be found. But the market is evolving quickly, and I think we've been -- not only have we been proactive, but we've also been reactive very quickly to ensure that we remain at the forefront for consumers. So broadly speaking, I do think that there's a need in the market for broad packages. And as we've always said, the goal is to deliver value to consumers along the demand curve at different price points. So that's what we'll continue to focus on. And again, as it relates to ESPN, I think everyone is looking for the right strategy. And again, this is just another example of a company that's looking to leverage all of its assets and create a better price-to-value equation for consumers in such a competitive environment.

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

Congratulations on the positive EBITDA you printed in the quarter. So if I could, I'd like to start by asking about the ad trends in the quarter. Obviously, you had some nice uptick in the ad ARPU year-over-year. So that was really nice to see. I'm wondering if you've seen a slowdown in the ad bookings related perhaps to the tariff pressure on consumer brands. And if by what you surmised the Fubo Sports Network FAST channel is working to offset those trends, if that's the piece that's offsetting it or if there are other factors, if you could highlight those?

Alicia, this is John. There's a few things in there. So if I missed anything, let me know. But I'll start by saying on the [ tower ] front, I think I called out auto softness last quarter, particularly in foreign auto. I would say that's continued. But I wouldn't call the overall decline in dollars significant. I would say maybe it's 1 percentage point plus drag in terms of the total portfolio on growth. I'd say outside of auto, nothing stands out as it relates to, call it, tariff driven. More broadly on the consumer, what I would tell you is that as I look at some of the stronger categories and some of the larger categories, retail e-com is one of our top 5 categories, and it was up double digits. Tech was up strong double digits. And so I would say nothing too obvious there as it relates to the tariff piece. I'd say more broadly on 3Q, I think too soon to call. July, as you know, is our smallest month of the quarter. I don't know that we have a strong read on back-to-school yet. And with the sports calendar hitting later this month, I'd say we'll have a better sense of the quarter kind of by mid- to late August. One last thing I'd also add -- sorry, go.

I was just wondering if you could highlight the -- at least qualitatively, how the FAST channel is contributing.

Yes, sure. Yes, sure. On the FAST channels, I think what David and I have said in the past is that in terms of the totality of it, the dollars are in the mid- to high singles and the growth is in the strong doubles. And so over time, that number has grown, meaning as a percentage of the total. So now FAST channels are, call it, high single digits, approaching low doubles and so -- and still growing strong double digits. And so a modest positive tailwind, if you will, to the overall ad growth.

Your next question comes from the line of Joseph Spiezio with BTIG.

In absence of guidance this quarter, I was just kind of hoping to get your thinking around the directional trend for EBITDA from here. If we strip out some of the onetime costs that were in the quarter, we still land at a pretty good number. So I was just curious if this is maybe the new normal in terms of EBITDA profitability or if there are some seasonal fluctuations that we should keep in mind looking forward?

Yes, sure. I'll take that. This is John. Look, I would say that, as you know, our business has been and remains seasonal. Historically speaking, 2Q has been our strongest adjusted EBITDA quarter of the year. And then in the back half of the year, while we grow our subs sequentially meaningfully typically, there's also marketing costs associated with that. And so I would say that the normal seasonal trends as it relates to profitability directionally should continue.

Your next question comes from the line of Doug Arthur with Huber Research.

A question either for David or John. Just interested in your take on the sub guide that -- the original sub guide for Q2 and then the revised sub guide a couple of weeks ago, what were the sort of puts and takes on that? And then a follow-up. In terms of these broad relationships that you have terminated over the last several quarters, where are we in terms of the arc of those like Univision? Where do you see that sort of annualizing?

This is John. Maybe I'll start with the sub guide. And so look, to your point, we guide more or less to where we're forecasted in terms of pacing. And so we came in, call it, 100,000 or so ahead relative to the original guide. I would say it was a couple of things there. One was that we continue to see strong interest in the Latino product given the price reduction there post the Univision drop. And then we've also seen better retention trends in terms of churn across the portfolio for the quarter.

Yes. And just to add to that, as John said, I mean, we have had a very difficult year that I think we've performed exceptionally well in with respect to the number of content channels and partners that have dropped since June of last year, as you've rightly stated, Warner Bros. Discovery as well as Univision. I think, again, as I said earlier, it's very clear consumers are price sensitive at this point. They're looking for a tremendous amount of value. And we have seen -- although we ended up not able to get to a deal with Univision, we've still seen a pretty strong conversion uptick on our Latino packages, which John briefly mentioned in his earlier comment. And so we think that those deals will ultimately work themselves out. But I think right now, we're situated well. We've been able to stabilize the advertising business after losing a significant number of advertising-enabled channels. We've started to put together some stand-alone offers. We're very focused on our skinny sports service that we've called Fubo Sports. And so again, we're really looking for price value equation. I think over time, particularly over the next year with some of the changes that are going to happen at the traditional media company side. We just -- we're keeping our options open. But again, we think those things will work themselves out in due time.