Hello, my name is Melissa and I will be your conference operator today. At this time, I would like to welcome everyone to the fuboTV Q3 2022 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question-and-answer session. [Operator Instructions] I would now like to turn the call over to Ms. Alison Sternberg, SVP, Investor Relations.

Thank you for joining us to discuss fuboTV's third 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. Before we begin, 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 long-term targets, market opportunity, acquisition strategy, and ability to integrate those acquisitions, expected synergies of the technology platforms and our business strategy and plans. 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 September 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 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 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 morning, everyone. We appreciate you joining us today. I'm very pleased with the results for the third quarter. We delivered North American revenue of $290 million, up 40% year-over-year. Ad revenue in North America of $22.5 million up 21% year-over-year, 1,231,000 paid subscribers in North America and 350,000 in rest of world and we closed the quarter with $307 million of cash and cash equivalents, restricted cash and short-term investments. More importantly, I am pleased with the direction we are headed in and the overall trends of our business as we make tough, necessary strategic decisions to improve the overall business. We are confident the actions we are taking and the path we are on will yield value for our customers, our shareholders and our employees. Before moving on, I wanted to discuss our recent decision to close our Fubo gaming business and cease operations of our owned and operated Fubo sportsbook. This was not an easy decision, and it was made after much careful deliberation. Ultimately, we felt the decision was prudent in support of our profitability goals, allowing us to focus all of our resources on our core streaming business. But as we continue to focus on data and interactivity to differentiate our virtual MVPD we still believe the integration of gaming and live sports streaming is powerful. We remain open to the possibility of exploring ways to optimize our assets in the gaming space without investing our own capital. The closure of our Fubo sportsbook, along with our sharp focus on the judicious deployment of capital and cash preservation provides us with added confidence in our current liquidity position. We were pleased to see improvements in our adjusted EBITDA margin in the third quarter, which we expect will continue throughout the balance…

Thank you, David. And good morning, everyone. We had a strong quarter across several of our key KPIs. Subscribers total revenue and ad revenue, delivering against our third quarter forecast. Global revenue for the third quarter was $224.8 million, a 43% increase versus $156.7 million in Q3 of 2021. Total revenue included $201.9 million in subscription revenue, a 46% increase, versus $138.1 million in Q3 2021 and $22.7 million in advertising revenue, or a 22% increase year-over-year. North American subscription revenue grew to $196.3 million, an increase of over 42% year-over-year despite a highly competitive and challenging operating environment. While rest of ROW subscription revenue grew to $5.6 million. We also achieved a sequential improvement in operating cash flow and year-over-year improvement and adjusted EBITDA margin and expect these trends to continue throughout the balance of the year. And Rest of World Streaming, which includes Molotov, we ended the quarter with nearly 360,000 total paid subscribers. Our focus is primarily on integration and realization of the approximately $75 million of cost synergies expected between 2022 and 2025. We're also pleased that Rest of World Subscriber growth, revenue growth and cash flow has performed well against expectations. Total operating expenses as a percentage of revenue increased by 97 basis points versus the prior year period, primarily due to a $35.5 million non-cash impairment charge associated with our gaming segment. Our third quarter adjusted EBITDA loss came in at $92.7 million compared to a loss of $81.3 million in the third quarter of 2021 and adjusted EBITDA margin came in at minus 41% and improvements of 1,062 basis points year-over-year. Moving down to the income statements. Net loss in the third quarter was $152.7 million, including the aforementioned non-cash impairment charge of $35.5 million. This led to a third quarter 2022 earnings…

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

Hi there. Good morning, guys. Let me start with advertising. I just want some granularity because I had -- ARPU was down 12%. But we have this direct sales force, David. And remember, we're going to add a direct sales force because we're going to help our ARPU, so and I would have guessed that September being a strongest month was because of content and you got the NFL back in September. So I would have thought that would have aided our crew not driven to death. So I guess the question is, could you just give us some more granularity on what's driving the lovely advertising growth, David?

Sure. Why don't I kick it off and John can chime in. First of all, good morning.

Good morning.

Yes, so you have to remember we have -- ARPU is not just for U.S. English packaging. So we have a different mix that comes in. So the ad ARPU is probably not the best way to look at it. When we isolate the English packaging from the rest of the packages that are available. In North America, we see a pretty strong increase year-over-year. On a CPM basis, we're up about 6%. And again, we're looking at revenue right now, which was up 21%. Just in terms of -- in terms of fill rate, in terms of CPM and overall direct business, we've seen a significant uptick, and we're very confident in the continued growth of the ad business. But again, on the ad ARPU side, you're going to see fluctuations in ad ARPU just really related to the mix.

And Laura, let me add a couple of things to your question as well, and to augment what David had said. And so if we look at just say, ad ARPU and a vacuum in the U.S. only sequentially was up in the high single-digits. When we get to the fourth quarter on a U.S. only basis. That should be solidly in the positive year-over-year. And not that U.S. is directly, but I would just add in terms of our ad growth, if you look at us, I think versus some of the others that have already reported. I think we put up some pretty good numbers and I think our outlook is probably a bit better. And I think part of that is an outcome of -- to your point around direct sales. I think the sales team additions that we made earlier in the year started to hit their stride later in the third quarter called three to six months after they were -- they joined the firm. And so that is also one of the benefits that we're starting to see coming out of the third quarter into the fourth quarter.

Fantastic. Thanks for that granularity. And my follow-up will be on gaming. David, when we came into the IPO you had to deal with FanDuel, you walked away? We did the sportsbook would have closed that down. Could you talk about your negotiating position? When you're going back to like the DraftKings and FanDuel's on how that's changed? Since you walked away from the FanDuel arrangement originally, which it sounds like sort of what we're going back to now?

Yes. So just to be clear, I'm extremely bullish on the integration of gaming and video, obviously, given the macro environment, we have a responsibility to shareholders to make the right short and mid-term decisions. And so we are in discussions with, I would say numerous books, beyond the ones that you're probably mentioned, and these discussions, I would say are pretty healthy. It's a very competitive landscape on the gaming side. And if you think about it, 98% of our audience watches sports. I was just looking at the numbers last night, that's pretty amazing. Especially relative to an Amazon, where if you think about it 150 million Prime customers and the latest ratings, whether you take, Nielsen, or whether you take their own numbers is still about, 7% to 8% of audience. So we feel that, we'll have some really solid discussions over the next few months. And we'll look for a way to maximize the value of our assets, both in the gaming side as well as on our audience. But I think those conversations will continue. And again, I think we're in a pretty good position given the fact that it's a very unique asset. Fubo being unique asset.

Before we move on. One last thing, before we move on, back to the ad ARPU, because I also wanted to bring it into North America broadly, as opposed to U.S. only, because I think it's important to note that in the fourth quarter we would expect the ad ARPU to grow on both a U.S. and Canada basis year-over-year. And so that's grow nicely.

Yes.

Thank you very much.

You're welcome.

Your next question comes from the line of Shweta Khajuria with Evercore ISI.

Thank you very much for taking my question. I guess my first one is on -- David, your comment on CPMs until rates. So how should we think about that? Just on a go-forward basis, not only in the fourth quarter, but as more content from Disney and Netflix comes on streaming? How does that impact Fubo's platform? And then I have a follow-up, please.

Sorry, Shweta was your question related to those companies launching ad supported? So I wasn't sure exactly what's wrong with the question?

Yes, that's right. So would CPMs -- how would you expect CPMs on Fubo's platform to trend in the near to mid-term as more supply comes on?

Yes, so I'm actually extremely excited about the ad side of our business. We spent the first six months of the year really developing the platform, focusing on header bidding solutions, and other optimizations, leveraging some addressable deals, for more sort of data integrations. And we feel really good. We have, I would say CPM growth is still low 20s, if you will, up about 6% from last year. So that's a good sign. We also differentiate from Netflix, in particular, just because we're heavily sports and news oriented. So I feel like we're still in very much the premium space, you can see that as John said a few moments ago that our numbers relative to everybody else's come out, seem to be relatively strong. And in particular, our guidance, I think is also strong. We feel very good. We're continuing to see strong momentum throughout October. But there's significant room to go. As I said, we're in the low 20s. I anticipate when we hit our stride, we should be somewhere in the mid-30s. And then layering on top of that some addressability. We've also started to develop some new ad inventory, which is already sold out for the fourth quarter, we launched something that I've been tracking on Roku, which is their banner ads. And they use their banner ads to drive sales for different video services. So again, we're in the same space we have a customer that spends over $70 a month. We have a customer demographically who is male skewing 18 to 49, and very hard to reach on traditional television. So I think the positive side of Netflix and Disney is that they're actually going to take our message to market. And so we think that buyers will probably be more active in the connected TV space, which again roughly 95% of our inventory is connected TV inventory. So with premium content at a premium demographic, I feel very good about our ability to differentiate from some of the other offerings out there and can to continue to drive sales.

Thanks, David. Just to follow-up to that, how big is political as a percentage of the overall business? And my other question was on gaming, any additional color on how you're thinking about it in terms of cost savings? Thanks a lot.

Why don't I start on the political side, and then I'll let John go from there. So just on the political side, we have seen an influx of orders I would say about started about six weeks ago, eight weeks ago, which I would say the cadence of those orders has increased to almost daily. So it's with CPMs, that are well above what you typically would see in the third quarter. So I don't know if we can give a percentage, but I would say it's we can.

Yes, let me add little bit to that. I'd say it's mid-single-digit range, I'll call it of our annual revenue. So not quite like a local broadcaster, of course. And I would also tell you, relative to plan, if you will, we had a range of outcomes. And I'd say ultimately came in about 10% or so above our top end of the range of outcomes that we expected.

And then would you mind repeating the second question?

How should we think about cost savings from seizing your sports book and just the change in gaming business?

Yes, so we haven't given a sort of a rant, if you will, in terms of the investment in the sports. But what I would tell you, though, as you would suspect that it certainly extends our runway. And so I think what we've said historically, is that we have cash through 2023. And then our cash needs in '24 are relatively modest, I would say in broad strokes, that ending or exited gaming would modestly extend that. And then I would also add, don't forget that Q1 tends to be our highest cash use quarter from a seasonal perspective.

Okay. Thank you, John. Thank you, David.

Thank you.

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

Hi guys, good morning. Two if I may, just on the churn, you suppose an all-time low? Could you just speak to kind of what's driving that? And kind of, if you see any further downside, and as a follow-up, just any commentary around the fast channel, you said you had 60. And I think the goal is 100 at the Analyst Day by the end of the year, and just the benefit that's going to be ad business. Thanks.

Sure. What was the first question? Sorry, sorry, can you repeat the first question?

First question was around churn David and it is where you see growth.

Yes, so during the Roadshow in 2020, we set our long-term goal was to hit sort of mid-single-digits, I would say that we were pleasantly surprised to see that we actually hit that in the third quarter. And that makes sense. Because, as you know, we're seasonal business, September being the start of the sports calendar. And so you have a return of customers that either pause their service or just return. And so that feeds back into our net ads. And so I would say the brand is starting to drive a lot of value, people come to Fubo for the sports. And that's obviously supported by the number one ranking in customer satisfaction across all of these other services, which I thought was another big win. But people like the service, they liked the product. And we're starting to see that followed through not only from a net ads perspective on the growth side, but also from the churn perspective, so we anticipate continued year-over-year blended churn to continue to decrease going forward.

[Indiscernible].

Yes, and then on the fast channels.

So I'll give you a little more color on fast, Darren. So for context, I think in the third quarter, our fast as a percentage of ad revenue nearly doubled sequentially. Not that it's a huge number, but it certainly is trajectory wise, looking good. From the perspective of the fast channel, as you are correct, we ended the third quarter at 60. As you saw in the release, we have added to that in October. And we'll see where we end the year, it'll be plus or minus 100. But if you don't get there, by the end of the year, which I think we have a decent chance to do, we'll be there early in '24, or '23. And the runway there remains, I'd say pretty large. Yes and Darren just to add, strategically, why this is important, I'll give you a more -- some more color on that, you have all of these plus services continue to try and migrate customers from bundles, into their own services. And so what we decided was continuing to add fast channels allows us to also push consumers to channels where we actually have more inventory. So just to give you a sense, for the third quarter, about 3% of our viewership was on fast channels. So, what this also allows us to do is to create better leverage for ourselves when we start to negotiate deals. And over time, we obviously have more inventory in the fast channel. So this is something that we're going to continue to do. And so to create two things, one more leverage when we renew some of our entertainment deals. And then on the opposite side, it should also be able to help us drive more ad revenue, albeit at lower CPMs, but still, really allows us to sort of leverage all of the data capabilities and addressability that we're developing now. So we're very bullish, one on the ads business in general, number two, on our ability to keep people engaged on the platform.

Helpful, thank you.

Your next question comes from the line of Clark Lampen with BTIG.

Hey, good morning. I have got two please. John, I'm sorry, if I'm prompting you to rehash right now. But for the fourth quarter guidance, is there anything baked in for the World Cup? And if there is, could you compare that to maybe what you saw with the Euro tournament? And I guess I'm curious, since there's less of a gap now between domestically in sort of Champions League content post tournament, do you expect maybe higher retention of any subs that you could be adding? And then David, just on the Fubo gaming transition, you talked about, sort of the calculus or on why he doesn't move away before in some components of that decision. But was there anything that you saw with sort of this idea of marrying live sports and betting options that ended up being either less compelling or maybe with the engagement not up to the level that you were initially expecting? I'm just curious if sort of from like a base product and sort of user engagement perspective, there was anything that turned out to be a little bit different than maybe you were anticipating. Thanks a lot.

Yes, you want to start with World Cup.

Yes, sure. All right, perfect. Thanks for the questions. Yes, so taking a step back at the midpoint, our guidance assumes about 130,000 net ads to the quarter, that does take into account to some extent the impact of World Cup on both acquisition and reactivation. And for context, the Euros tournament, which was December of last year, that was a key driver for that quarter. And we anticipate a higher number of trials owing to higher interest for the World Cup. And I'd say given that the Euros was broadcast in the summer, versus the World Cup being broadcast during NFL college football in the holidays, we anticipate higher engagement, due to cross viewership of non-World Cup content, yielding better 4Q retention on World Cup sales relative to Euro. So maybe I'll leave it there.

Yes, I'll just add to that. I mean, there are some, there's some noise around the World Cup this year, which we've never experienced in the past, as you know, it's now coming into the fourth quarter. And that also has to compete with NFL and college football. Moreover, if you think about just time zone wise, these games are not in Primetime, so they'll probably be a resume somewhere around 10 am. So that may also have some impact. So, but we do anticipate that, consumers will choose Fubo over competitors during the World Cup. And so we're certainly excited about that. And we'll follow that very closely. And the teams are prepared to take advantage of any organic traffic that comes in. As it relates to gaming. I'm very upset about gaming in general because I do believe in the thesis. More importantly, we had about seven to 10 days of work in New Jersey, where without any marketing or really any activity we saw, daily and weekly upticks in new accounts related to watching Fubo channels on the platform. So I think that our goal was to launch and start to tweak as we do, improve the funnel. And so the good news is that, the technology is available. And when we decide, who that partner will be. And obviously, we want to make sure that the economics make a lot of sense for us, we'll continue to develop that product for third quarter, it might initially start with one and maybe down the line years from now, two years from now, we might decide that it might be best to just create more of a market auction type environment, for gaming. So what we'll have to see, but it's touch and go at the moment. But…

Thank you both.

Your next question comes from the line of Nick Zangler with Stephens.

Hey, guys. I wanted to ask about fast channels, because this is a honestly it's a conundrum for me. If a Fubo user spends too much time on fast channels on that offering, I would think they might wonder why they're paying a monthly fee to Fubo when these fast channels are available for free on the CTV operating systems like a Roku and then Vizio through which the users obviously accessing the Fubo app. Obviously, I think that could then lead to a user dropping the service. But at the same time, this changes, I guess, if the fast channels are exclusive. And so my question is, like, how often if that's the case for you guys, where you have exclusive fast channels? And are you trying to push into these exclusive arrangements so that the fast channels you offer are only available on the Fubo app?

Yes, very good question. And I would like to answer with another question. And my question to you is with broadcast television, that's effectively free with an antenna, why do people pay for broadcast television on cable? That is the conundrum. What I would say is Fubo is pretty much a gateway to television and entertainment, is the way we look at it. And so you're actually paying for the premium product the ability to watch, NFL and World Cup and all these great sporting events, all of your news programming. And at the same time, we leverage our AI and discovery engine to surface content that we think is going to be relevant for you. And so I'll give you an example. So for instance, if you're watching a design show on Bravo, or on HD TV, if we surface a design show from a fast channel, I don't think a customer will care where that particular piece of programming comes from. I think what's important in this case is that the customer understands that we're actually providing an amazing service. The ability to give people all of the content in one place effectively, efficiently with a solid user experience. So I think from my perspective, again, I use the NFL example, they've done a great job, cool, cohorting users and slicing and dicing their content to maximize the value. I think there's a play for us to be able to look for content that is very similar in nature, high production quality and surface that content to users. Obviously, that would help us drive engagement and help drive revenues. As it relates to exclusivity, I think Fubo has proven that it can compete head-to-head on a non-exclusive basis. According to MoffettNathanson the market is growing at roughly around 13%. We're still continuing to grow well ahead of that number, I think somewhere between call it 25% and 30%. So our goal is to ensure that we have as much content as possible that's relevant to our user base. We do have some content we've been developing, as you know, we have the Fubo Sports Network that continues to grow very quickly. And that's being distributed across the web. And we've started on our relationship with Ryan Reynolds. And so we'll look to produce some of that, obviously supported by brands underwriting the content. But overall, I look at Fubo as an entry point for TV, and over time I suspect, what you'll see is you'll be able to buy pay per view, EFT, watch free television, and then have access to premium cable networks and plus services over time.

That's fair. Okay. So basically, that's a good answer, the -- which is provide the consumer with as much content as possible. And then part of the value prop is sourcing, servicing and providing it to the consumer, whether or not effectively the customer had to pay for that viewership or not your existing arrangements. Okay. That's fair. That's good. I did also want to ask, just because it's been choppy out there, we've heard some pessimistic views for ad spend in the fourth quarter some major CTV players, you guys stated September was the best month of the quarter. You seem very optimistic for the 4Q if I'm reading your right. Maybe just a little bit more detail here. Why specifically, you're optimistic for 4Q. I'm assuming you guys are continuing to win new advertiser relationships, especially as the direct sales with sales force goes to work, but curious, maybe like on existing accounts. Are you seeing the pull back on an organic basis or just knowing that there have been some players that have provided a very pessimistic outlook for 4Q? Can you talk about why you're so optimistic?

Sure. Let me start and John you can chime in. So look, I would say that there are two categories that are outperforming. There are advertisers within non-performing categories that are outperforming. And so, it really comes down to a few things for us specifically. Number one is, you're now entering political season, which has puts pressure on the inventory, that's number one. Number two, you're at the height of the sports calendar, going into what looks to be a pretty cold winter. And so people typically spend a lot of time at home, we see ours viewed increase in the fourth quarter and into the first quarter. So I would say the pressure on the inventory from political, the addition of the World Cup will also create a lot of interest in November and December. And there are categories like retail to some degree that are coming back. And I think the advertisers are very interested in addressable inventory. And I will -- I don't know if you know this already, or this is something that I'll be highlighting for the first time. But if you think about, where we sit on the spectrum between a television set a dumb television set, and the consumer I would say that the Vizio's or the Samsung's or the Roku's they are sitting at the opposite side of the spectrum right in front of the TV, right? And so because we're sitting right in front of the customer, we're able to collect an exorbitant amount of data on those users, number one. Number two, because we've developed our own ad proxy capabilities, we actually can decide which of our partners sees which data points. And so I think that creates a lot more value for us. And we obviously know our users better than a TV platform would was just selling on a blind basis, I would assume. So from that perspective, I think we're pretty much in a strong spot where Sports CPMs are going to be very strong, you have new CPMs, that are also on the rise just due to political. And we've just launched our new banner ads on the homepage that from my understanding on one platform are already sold out. So that gives us some comfort into our numbers. And we expect strong returns on the advertising side throughout October and December.

Yes, I add maybe one or two things to that as well, Nick. I caught up with our sales team earlier in the week. And I'd add maybe a couple of data points. One is that, and I know that others have talked about cancellations and other things in terms of a scatter market, we have not seen cancellations. I think also in terms of our exposure, I think some of the weaker categories like crypto and others we don't really have exposure to. We don't really choose to take gaming money, we didn't really haven't crypto money, and those two are the weaker categories. So and then on top of that, I think that again, our advertisers again, that they like our audience, they like our programming, and they like it live.

Awesome. Thanks so much, guys. Congrats on the solid quarter and good outlook here. Thanks.

Thank you.

Thanks.

We have reached the allotted time for questions. This concludes today's conference. You may now disconnect.