fuboTV - Q4 2022

Transcript

Operator (participant)

Good morning. My name is Rob, I'll be your conference operator today. At this time, I would like to welcome everyone to the fuboTV fourth quarter and full year 2022 earnings conference call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by one on your telephone keypad. If you would like to withdraw your question, again, press the star one. Thank you. Alison Sternberg, Senior Vice President, Investor Relations, fuboTV, you may begin your conference.

Alison Sternberg (SVP of Investor Relations)

Thank you for joining us to discuss Fubo's fourth quarter and full year 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 full year and Fubo's strategy, and John will cover the financials and guidance. 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 cash flow and adjusted EBITDA targets, our business strategy and plans, expectations regarding innovation, growth, and profitability, consumer industry and advertising trends, the integration of Molotov, planned launch of unified platform and expected synergies, and market opportunity. 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 annual report on Form 10-K for the year ended December 31st, 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. 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 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 Q4 2022 earnings shareholder letter, which is available on our website at ir.fubo.tv. With that, I will turn the call over to David.

David Gandler (Co-founder and CEO)

Thank you, Alison. Good morning, everyone. We appreciate you joining us today. I'm proud to report that Fubo's global streaming business achieved record highs in the fourth quarter and full year 2022 across several KPIs. We delivered over $1 billion in total global annual revenue. We exceeded over $100 million in annual ad revenue in North America. At the same time, we achieved positive gross profit in Q4. We also closed the year with 1,445,000 subscribers in North America, an increase of 29% year-over-year, and 420,000 subscribers in our Rest of World streaming business, an increase of 117% year-over-year. 2022 was an inflection point for our business.

Our goal is to continue on this trajectory by expanding unit economics and generating positive free cash flow in 2025. My confidence and enthusiasm are not just based on our results, but on the dynamics and trends across the media and consumer landscape at large. Friction and fragmentation continue to persist in streaming, frustrating customers and creating a challenging path to sustainability for media companies. As a result, we continue to see the aggregation model and bundling as a massive opportunity. Our service empowers consumers to seamlessly access all of their favorite content via a single app from anywhere in the house and on any device or operating system. Fubo plays an important role in the media ecosystem. Our customers already spend over 100 hours on our platform every month on average, reflecting the value we provide to media companies, content creators, and advertisers.

As an aggregator and distributor of content, we will continue to work to advance on our vision, and that is to give customers a gateway to all television, surprising and delighting them with a personalized and seamless user experience. U.S. consumers are already supporting our vision. We are extremely proud to rank number one in J.D. Power's 2022 customer satisfaction survey among live TV streaming providers. We believe this proves that consumers understand the value of an aggregated multi-channel streaming platform, and in particular, Fubo's differentiated sports first offering. On the content front, it's becoming clear that we have more leverage than we expected due to the certain content drops that historically have had almost no impact on subscriber growth and retention. As we optimize our content portfolio through our first-party data, we plan to selectively carry content that will drive subscribers and leverage our increased scale.

We expect to drive leverage on the subscriber-related expense line on a year-over-year basis going forward. Before John Janedis dives into our subscriber guidance, I wanted to give you added context. Fubo has always punched above its weight class. We recently increased prices of our U.S.-based plans by $5. We priced up against the recently added Bally Sports RSNs from $11-$14 to be able to offer these and all RSNs in our base plan and to the widest number of consumers. This is a major price up of $16-$19. Our biggest increase and the first time we raised prices in Q1, which is typically lighter on sports content. The price up and its timing, coupled with the World Cup cohort and typical Q1 seasonality, is why we are delivering a conservative sub-guide.

That being said, we are still very excited about our growth prospects in 2023 and beyond. Following these moves in Q1, we have been very pleased with our early retention metrics and are monitoring closely. Excluding the estimated impact of the 2022 World Cup, we believe we will maintain double-digit subscriber growth in 2023. We also remain committed to super serving sports fans, which is at the core of our brand DNA. Fubo is the home for local sports coverage as evidenced by our carriage of approximately 35 regional sports networks. Our RSN portfolio gives us leading coverage of baseball when, notably, a large virtual MVPD recently reduced their coverage significantly. Fubo now delivers at least one RSN to nearly every U.S. subscriber and is the lowest-cost streaming option for local teams.

FAST channels are a growing component of our margin expansion strategy as it relates to the leverage in our subscriber-related expenses. FAST channels help us achieve two goals. They provide a wide range of content, creating more fungibility and negotiating leverage with content partners. They also provide us with significantly more ad inventory relative to our current cable network deals. As a reminder, we do not have any inventory with broadcast networks. The 80+ FAST channels on our platform generated 5% of total ad revenue in 2022, significantly up from 1% in 2021. That's why we are working to improve discovery of our FAST channels to deliver even more ad inventory. In general, our advertising business continues to outperform, growing 30% in Q4 on a year-over-year basis, despite a very difficult quarter that impacted the entire industry.

Our largest advertisers from 2021 increased total spend with us in 2022 by 85%, and we added a record number of new brands. While we are excited about our success last year, we still have much to do. This includes improving our ad tech, integrating more data products, and packaging up our inventory. On the product front, Fubo has historically been first to market among vMVPDs with new features and capabilities, from 4K streams to multi-viewing. Our internally built tech stack has enabled us to be ahead of the innovation curve. We see AI and computer vision products as a natural evolution of our commitment to interactivity. In December 2021, we acquired a company called Edisn.ai, anticipating the power of artificial intelligence and computer vision to evolve the consumer experience and augment our advertising capabilities.

With this technology, we can programmatically understand what happens in each frame of a live stream in real time. We are now focused on building product features that can allow sports fans to lean forward and choose to engage on a per-play basis, not just on a per-game basis. Additionally, we can leverage this tech to reduce costs, maximize the value of our FAST channels, introduce new ad products, and optimize subscriber growth. We currently have multiple patents pending with this technology. We're excited about the initial results of our new capabilities, and we'll also continue to explore opportunities with certain cloud providers about implementation on a B2B basis. We look forward to sharing more on our progress in the quarters to come. Finally, the fourth quarter also marked the one-year anniversary of our Molotov acquisition.

The acquisition has been a success, delivering strong growth of our Rest of World streaming business, more than doubling subscribers and achieving meaningful revenue growth, all with a modest marketing budget. Molotov's freemium model has proven to be effective and efficient, something we continue to evaluate as we think about the future of our business. I could not be more excited for 2023. There are still more than 62 million traditional pay TV consumers here in the United States. A disproportionate number of cable customers who are cutting the cord continue to choose Fubo over many of our competitors. In summary, we are very pleased with our record Q4 and full year 2022 results.

We are continuing to prioritize profitable growth and remain confident of our mission to deliver a leading global live TV streaming platform differentiated by the greatest breadth of premium content and interactivity. I will now turn the call over to John Janedis, CFO, to discuss our financial results in greater detail. John?

John Janedis (CFO)

Thank you, David. Good morning, everyone. We had a strong quarter across our KPIs, including subscribers, total revenue, and ad revenue, and delivered results well above our forecast. For the full year, total revenue was $1 billion, a 58% increase versus $638 million in 2021. This includes North America streaming revenue of $984 million and Rest of World streaming revenue of $24 million. Within the fourth quarter, North America subscription revenue was $278 million, representing 36% growth year-over-year. This was driven by subscriber growth as well as total ARPU, which was $72.50, representing 4% growth year-over-year. In the fourth quarter, North America advertising revenue was $33.6 million, representing 30% growth year-over-year.

We added a record number of new advertisers, completely sold out our World Cup ad inventory, and had a record-breaking political season. This reflects our efforts and success to continue to expand our relationships with our largest advertisers. Moving to Rest of World. Revenue in the fourth quarter was $7.2 million. While our focus is primarily on integration, we are pleased with the performance of Molotov, particularly as subscriber growth and cash flow has continued to trend ahead of our expectations. Turning to our path to profitability. As we announced in October, we ceased operation of our sports book in 4Q in support of this. As a result, to allow for a meaningful assessment of our streaming business, the following results are on a continuing operations basis, excluding the historical results of our former gaming segment, which are accounted for as discontinued operations.

On our subscriber related expense line, we reported modest operating leverage in the quarter. Importantly, we expect the leverage in SRE to accelerate meaningfully in 2023 as we remain focused on improving operating leverage across all of our key cost buckets. Importantly, we also achieved positive gross profit of $3 million for 4Q. While we expect typical seasonal patterns in our business, we believe gross profit and all our key operating metrics will continue to improve on a year-over-year basis in 2023. Moving down the income statement, net loss in the fourth quarter was $95.9 million.

This led to a fourth quarter 2022 earnings per share loss of $0.48, inclusive of a $0.02 impact from operating expenses associated with the Molotov business acquired in 4Q 2021, compared to a loss of $0.64 in the fourth quarter of 2021. Fourth quarter adjusted EBITDA loss came in at $75.4 million, compared to a loss of $73.4 million in the fourth quarter of 2021, and adjusted EBITDA margin was -24%, an 814 basis point improvement year-over-year. Adjusted EPS in the fourth quarter of 2022 was a loss of $0.39. Note that adjusted EPS excludes the impact of stock-based compensation, amortization of intangibles, amortization to debt discount, and other non-cash items.

In the fourth quarter, we achieved cash usage of approximately $24 million, including $3 million related to the closure of our gaming segment and our most favorable in our time as a public company. Our expectation continues to be that operating cash flow losses will moderate meaningfully in 2023. On a full year basis, 2022 adjusted EBITDA was -$323 million. We believe 2022 represents peak losses for our business, and both adjusted EBITDA and cash usage will improve on a year-over-year basis going forward. From a capital structure standpoint, we remain highly disciplined to afford fuboTV the financial flexibility to fund measured and disciplined growth initiatives. As of December 31st, 2022, we had 209.7 million shares of common stock issued and outstanding.

As it relates to our balance sheet, we ended the quarter with $343.2 million of cash equivalents, and restricted cash. This includes $63.2 million of net proceeds from security sales pursuant to our at-the-market program. Moving on to our guidance. Our Q1 2023 guidance reflects our continued emphasis on ARPU and unit economic expansion. In projecting 1Q, we took into account the impact of seasonality, the strong benefit from the World Cup in 4Q 2022, our recently announced price increases, and our announced content portfolio optimization. Our North America 1Q guidance calls for subscribers of 1,140,000 to 1,160,000, a net revenue of $295 million-$300 million.

While the 1Q subscriber guidance represents 9% growth year-over-year at the midpoint, the revenue guidance represents 26% growth year-over-year at the midpoint. This reflects our emphasis on ARPU expansion and strengthened unit economics, with revenue growing at roughly three times forecasted subscriber growth. For the full year, our expectation is for subscribers of 1,510,000-1,530,000, representing 5% year-over-year growth at the midpoint, and a revenue of $1.195 billion-$1.225 billion, representing 23% year-over-year growth at the midpoint. This again reflects our emphasis on ARPU and unit economic expansion, with revenue growing at roughly four to five times forecasted subscriber growth.

Within our Rest of World segment, our expectation is for 1Q 2023 revenue of $5.5 million-$6.5 million, and subscribers of 368,000-373,000. Full year 2023 revenue of $24.5 million-$28.5 million, and subscribers of 395,000-415,000. In closing, Fubo delivered record fourth quarter and full year results across a number of key financial and operational metrics. As we look ahead to 2023 and beyond, we remain focused on the unit economics of our streaming business, margin expansion, gross profit, and cash usage as we track towards our previously stated goal of achieving positive cash flow in 2025.

Operator (participant)

We are now ready for our question-and-answer session. At this time,

David Gandler (Co-founder and CEO)

Excuse me. I'd just like to quickly make an announcement. John and I are thrilled to announce that we raised gross proceeds of approximately $68.1 million this morning in block trades at a negotiated discount to Friday's closing price under our ATM program. This helps fortify our balance sheet and advances us on our path to achieving our positive free cash flow target in 2025. More importantly, we believe this financing demonstrates our continued ability to access capital as needed. Thank you.

Operator (participant)

At this time, I would like to remind everyone, in order to ask a question, press star then the number one on your telephone keypad. We ask that you please limit yourself to one question and one follow-up. Your first question comes from the line of Shweta Khajuria from Evercore ISI. Your line is open.

Shweta Khajuria (Managing Director and Internet Equity Research)

Okay. Thank you for taking my question. Could you please talk about the early impacts you've seen from the price increase on churn? I understand the guidance and the combination of ARPU and sub growth, but what have you seen on churn and retention rates from price increase? Could you please also remind us the timing of when the price increase actually went into effect? Thank you.

John Janedis (CFO)

Thanks, Shweta. This is John. I'll start. Thanks for the question. Yeah. For a reminder, we announced the price increase on January 6th for new subscribers, and then it kicked in on February 6th or so for existing subscribers. The price increase was $5, and then there was another increase on top of that for the RSN subscribers. I would tell you that to date, if we look at the cohort of existing subscribers starting from February 6th, we only have, call it, two to three weeks of data. I would tell you, we expected elevated churn, but I would say that the churn that we're witnessing actually has come in below what we would have expected.

I'd also tell you that our marketing team is doing a great job in terms of coming up with different ways to reach potential subscribers. We're also seeing, I would say, better, trials, if you will, to start the year. David, anything else you wanted to add or?

David Gandler (Co-founder and CEO)

No, I think you hit the nail on the head. Shweta, I would also say that, you know, the guidance that we provided was relatively conservative just because of the price up. The size of the price up was pretty significant. You know, the $5 base price up, plus the $11-$14 in the RSNs, was pretty significant. If you think about that plus the timing of the price up, we typically price customers up in the third quarter. This was our first time pricing up customers in the first quarter.

Uh, and then you have-- you add on top of that the, the regular seasonality, um, you know, plus some other noise such as the CBS affiliates, and we felt, you know, uh, we would, uh, air to the, uh, side of, uh, conservatism on this. But as John said, you know, we've been very happy with, uh, retention, uh, albeit it's only been about, you know, three to four weeks, uh, at the moment. But, you know, things are looking, uh, very good, and we're very confident about, uh, you know, continuing to drive growth double digits ex World Cup, uh, for, uh, 2023.

Shweta Khajuria (Managing Director and Internet Equity Research)

Okay. Thank you, David. Thanks, John. A quick follow-up. When was the? Is this the first price increase ever? If not, when was the last one you did? How much was it, and what was the impact? That's it for me. Thank you.

John Janedis (CFO)

Sure, Shweta. I would just say as to your question, we did announce the price up of $5, I think it was on April 2nd of last year. Again, that was for new subscribers for the Pro and Elite package, and then it was for existing subscribers 30 days later, so call it around May 2nd of last year. I would note just to continue that theme, if you will, that we saw a little bit less churn than we would have expected in the second quarter as well. I know that some investors had concerns around would there be a tail, if you will, through the summer. Just as a reminder, I'd say that we saw the lowest churn ever for the company in the third quarter of last year.

Operator (participant)

Your next question comes from the line of Laura Martin from Needham & Company. Your line is open.

Laura Martin (Managing Director and Senior Internet and Media Analyst)

Good morning. Very nice numbers, you guys. I'll ask my two together. YouTube TV, you guys are a differentiated sports first virtual MVPD, and YouTube TV, your biggest competitor, has announced a Sunday Ticket. What's the impact on you if they become viewed as a sports first competitor? That's first. Bally's RSNs, if they run into financial distress, tell me how the money works for your commitment and what you think that does to the value of your bundle, please.

David Gandler (Co-founder and CEO)

Yeah. Well, hi, Laura. How are you?

Laura Martin (Managing Director and Senior Internet and Media Analyst)

Hi. Great

David Gandler (Co-founder and CEO)

... I'll start with or I'll let John talk about the RSN situation. Just in terms of YouTube TV, look, we are two companies that, you know, as of now are positioned to be sports first. We've taken very different roads. I'm actually very bullish on the direction we've taken. The RSN, you know, TAM is significantly larger than that of a Sunday Ticket. You're talking about, you know, 25-35 million sports fans that care about their local sports, that are still, you know, in the cable ecosystem. At the same time, historically, we've seen that the Sunday Ticket averages about, you know, 2 million customers. Again, I think that we've taken the proper direction to super serve sports fans.

We have some solid data around the RSNs. With respect to the Sunday Ticket, we never actually had the Sunday Ticket, so we don't see that to be an impact. Lastly, I would say is that YouTube TV is not selling that exclusively. I believe YouTube Premium will also be selling Sunday Tickets. Basically, you don't actually need a YouTube TV subscription to get it if you want it. Our customers would have access to that if they so intended.

John Janedis (CFO)

Lori, just on the Bally's front, I don't wanna get too into the terms of the contract itself, but I said that we do expect the games to air, and I would also add that the term of the deal is very short term.

Laura Martin (Managing Director and Senior Internet and Media Analyst)

Thank you very much. Great numbers, you guys.

David Gandler (Co-founder and CEO)

Thank you.

Operator (participant)

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

Clark Lampen (Managing Director)

Thanks a lot. Good morning. David, I wanted to go back to the comment that you made before Q&A began. I think you talked about $70 million or so of financing as of this morning. Maybe pro forma something like $400 million of cash on the balance sheet. Does that put you guys in a better position to now sort of navigate towards breakeven cash flow levels, you know, maybe in 2024 or 2025? Is there sort of moderate incremental sort of financing that you guys might need from here? Then stepping back, I wanted to see, I guess, if you could talk about sort of underlying sort of cable and ad market trends. Maybe for the latter, you talked about how the fourth quarter was strong from a sellout standpoint.

How has the early part of 2023 trended, you know, sort of relative to that? Maybe what should we expect, I guess, sort of going forward?

John Janedis (CFO)

Hey, Clark. Maybe I'll start with that, then maybe I'll take the second question first, and maybe give it a little bit more flavor around it. For context, in the fourth quarter, I know you have everyone turned by now in terms of what the market looked like. I would say for us, I think we certainly outperformed the CTV marketplace. We grew around 30%. That CTV market probably grew in the, call it, lowest 20s or so. From a month-to-month basis, October was the best month, November second best, as expected, December third best. It was also up double digits for us. As we roll into Q1, what I would say is that if you think about that cadence, January for us is probably the bottom.

We're seeing a bit of improvement in February. Although early, call it, expectation would be that we would see further improvement into March. Things are firming up a bit. From a categorical perspective for Q1, what I would tell you is, you know, some of the categories that are looking better for us would be, say, business. Autos actually looking decent. Personal finance, retail, and then health and fitness. That's the ad piece. As it relates to the cash component, I would say a couple of things there. You're right. What we said is that we had to raise some capital to get to self-funding in 2025.

You know, I would note that for the fourth quarter, our cash usage was, call it, around $20 million ex, call it, some gaming costs, the best quarter by far ever as it relates to cash usage. We had our 10-K file this morning. You may have noticed in there, we had a clean audit, that suggests we have cash to get at least through the next 12 months. That gets us into 2024. As I said, and David said before, we'll be self-funding in 2025. This further bridges that gap, and narrows that pretty significantly. I'd also say that, you know, we may want at some point to have a little bit of cushion as well.

If we find things to invest in the business that have high returns, we'd consider doing that.

David Gandler (Co-founder and CEO)

Yeah.

Clark Lampen (Managing Director)

If I could just ask a sort of quick follow-up. I know you guys don't formally guide to EBITDA or cash burn levels, but in terms of direction, you know, are there seasonal factors or maybe relative levels that you could comment on to give us a better sense for how the year should trend or maybe shake out?

John Janedis (CFO)

Yeah, sure. Yeah. Let me help you directly on that. For context, our cash usage was about $330 million for the year in terms of 2022. For 2023, you're right, there is seasonality. You know this from covering us, Q1 is always our worst cash burn quarter for the year. I would suggest that, you know, for those who are modeling, do not annualize the Q1 cash burn. It will be better year-over-year Q1 to Q1 2023 versus 2022. We expect that quarterly improvement in terms of the cadence for each quarter throughout the year. That clearly should get you to a number in the fourth quarter of this year that's, you know, somewhat modest as it relates to fourth Q cash usage.

David Gandler (Co-founder and CEO)

Clark, I just wanna add one more thing. You know, we have been working tirelessly to continue to, you know, improve the financial profile of the company. If you look at just in terms of our expenses. You know, the leverage we see on almost every line. We are now very focused on subscriber-related expenses. We are spending, you know, call it $900 million a year. There isn't a media company in the United States that would not want that kind of money, because it's very difficult to replace. We have about, I would say, half our deals are up in the next 30 months or so, and, you know, we anticipate that we'll be able to create some leverage.

You're already seeing it on the, you know, on the, on the BNT line. You're seeing a very slight downtick on the SRV line. We've raised prices now in the first quarter, again, in attempt to really drive down cash burn and increase profitability. We're very focused on our content partners. One thing I will say that's quite interesting is, we dropped two, well, one we dropped. We dropped one cable partner at the end of 2022 on December 31st. We've seen relatively no impact. At the same time, you know, the CBS affiliates didn't renew. That tactic, I'm not sure, worked in their favor. We haven't seen any, you know, negative implications so far.

There's been some noise about it, but we feel relatively strong in our position to be able to negotiate, better rates going forward. We're, we're excited about, you know, this year, and we are very much on track, with respect to what we know today, towards hitting, our 2025 targets.

John Janedis (CFO)

Clark, one last thing. You didn't ask this directly, but indirectly, 'cause they're related. We did have positive gross profit in the fourth quarter, and I would again say that we expect positive gross profits for the year, variability quarter to quarter given seasonality. I would say we should be comfortably gross profit positive in 2023.

Operator (participant)

Our next question comes from the line of Phil Cusick from JPMorgan. Your line is open.

Phil Cusick (Managing Director)

Hi, guys. Thank you. I wonder if we can just talk, go back re-quickly to the free cash flow. Your working capital this quarter, in the fourth quarter, was a nice support of cash. I wonder if you can expand on that and whether that's durable from here and can continue. And then you've got a number of content contracts coming up in 2023 and 24. What do you think is the potential to actually reduce per subscriber fees on those rather than just see slower increases than you've seen in the past?

David Gandler (Co-founder and CEO)

You wanna take this?

John Janedis (CFO)

You want to take it?

David Gandler (Co-founder and CEO)

Well, look, as I said, when you look at the streaming losses relative to the, you know, the payments that we are sending out monthly, and you look at our growth rate relative to, you know, affiliate growth rates, you know, it's clearly we're overpaying. We're at a moment in time where we feel very comfortable that we only need 80% of the gross rating points, you know, to continue to grow meaningfully and take disproportionate share, what we continue to do quarter in and quarter out, which was particularly evident in the fourth quarter with two other reporting companies. We're going to make that known. The good news is that, you know, we've dropped a number of partners over the years.

As you see from the balance of our spend, we will, you know, work on deals that make sense, that are mutually beneficial, and we'll bring content partners back and continue to optimize, you know, our content bundle, well into 2025. This is, clearly, one of our main items. That coupled with advertising. Again, just based on early indications from a retention perspective, as well as the relatively limited impact with respect to the content drop on December 31st, coupled with the affiliate drop as well, you know, on the CBS side, we feel very comfortable that we're in a very good position to negotiate improved deals.

John Janedis (CFO)

Yeah. Phil, I would just add on that, on that topic. You know, for the year or so that I've been here, I've probably seen about, call it 10 deals of varying size over the course of the past 12 months, and the majority of those did see rollbacks as it relates to pricing of those deals. That may be able to help you a little bit around that to add some context. In terms of working capital, look, there are obviously some swings. It's something we work on constantly. There's also some seasonality to it, so maybe we can help you more with that offline. But we continue to try and grind that to our favor.

Phil Cusick (Managing Director)

If I can follow up, I see the headlines coming across now on the $68 million. Can you just remind us, you did I think $60 million in the fourth quarter, another $68 million this morning, and you say there is probably more ATM to come to build your cushion. Without that, do you think you could be get to that break-even point in 2025 on your numbers?

John Janedis (CFO)

I would say that we will get close, to those numbers without any further capital raising. You know, what we've said before is the need is relatively modest, and I would say now that we feel very confident that, we can get there in the short to medium term, you know, if, the capital is at a price that we're willing to accept.

Operator (participant)

Our next question comes from the line of Darren Aftahi from Roth Capital Partners. Your line is open.

Dylan Dupuis (Managing Director and Senior Research Analyst)

Hey, good morning. This is Dylan on for Darren. Thanks for taking my questions. Could you talk a little bit about on the advertising side, what the contribution was from political and the World Cup as well, given those are more cyclical in nature?

John Janedis (CFO)

Yeah. I'll start. I don't know that I have the World Cup number here, but I would tell you that we've talked about political. That number, it was around, I think, $4 million or so for the fourth quarter. I don't have the World Cup number in front of me. I'm not sure if David does, but we can get that to you later on.

David Gandler (Co-founder and CEO)

We typically package up World Cup with other sporting events, you know, throughout the quarter. We can certainly get back to you on that.

Dylan Dupuis (Managing Director and Senior Research Analyst)

Great. Appreciate it. As a follow-up, when you sort of look at the guidance with subscribers, could you maybe provide some more color on the churn or just the drop-off in Q1? Sort of how do you think about what's from the price increase, what's maybe World Cup subscribers? Is any of it related to subscribers who might have been with you for, you know, over a year now, rather than the typical seasonality from second half to first half?

David Gandler (Co-founder and CEO)

Yeah. I'll take that one. Q1 has a lot of noise in it. We were attempting to be somewhat conservative given all the nuances. I'll just give you in my view, five nuances that we needed to think about as we went into the guide. One is we pulled forward on the World Cup cohort. First of all, it's a quadrennial event. Not only that, it also happened in December. If you think about that as a pull forward, that was one, you know, item that we had to think about as it relates to Q1.

The second item is the obvious seasonality of our business with the NFL and the Super Bowl closing out in February, which typically is a, you know, a weaker quarter in terms of subs historically for the virtual MVPD space. The third is the price up, which was a relatively, you know, larger price up than we typically would price up. Also the timing of that price up, which we mentioned earlier, was the fourth item. Last but not least, which we did not prepare for, was just the CBS affiliate situation, which caught us somewhat by surprise. Therefore, you know, when you put these five things together, we just felt, you know, we should be slightly more conservative.

Historically, you know, for most quarters, I think we've guided appropriately, as in the last quarter, we were able to exceed guidance. In terms of... The reason why I'm a little bit more comfortable right now is although we only have about four weeks of our, you know, new pricing in play, we've been tracking our retention and churn levels daily. They are performing very well relative to our initial forecast. Obviously, there are some time delays. February 28th, obviously, is an important day because it is the last day of the month, and typically, includes, you know, churn for end of the month for the 31st, the 30th, the 29th and the 28th.

There's four sort of churn days all in one. That's the reason why we decided that we'd rather stay somewhat more conservative. We feel really good about the quarter, and we feel very good about the year.

Operator (participant)

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

Nicholas Zangler (Equity Research Analyst)

Hey, guys. Congrats on the strong results and progress here. You know, it doesn't sound like there's been much of an impact from this CBS affiliate impasse, but I'm curious what steps you are able to take, if any, just to gain access. 'Cause I would assume you want the content because it's local news, it's valued by consumers, and as of right now, you're the vMVPD that doesn't have access to it, whereas your competitors do. Is there any way to negotiate with the affiliates directly, or does this just all have to flow through CBS? What can you do directly with them to gain access?

David Gandler (Co-founder and CEO)

Yeah. I think there's. Let me unpack that. There's sort of two components to this. One is this is a negotiation between CBS specifically and the affiliates. We don't participate in that. We've negotiated pricing with CBS, and, it's, you know, it's their job to secure the deals with the local broadcasters. That's one side of it. The other side of it is that you are correct. It's great to have local programming. I think the good news is that, you know, this local news is now readily available on a number of FAST platforms. I think that customers that are looking to get that content are probably able to find it very quickly elsewhere. We have not seen much of an impact there.

I think the problem is that everyone is looking to double-dip. You know, we've demonstrated that we're happy to pay a premium to bring in content that we feel is valuable to the bundle, such as the Regional Sports Networks. At this time, I think what's happened is we've realized that, you know what, we may again have even more leverage than we initially had anticipated, particularly since we are growing double digits year-over-year. At the moment, for us, we're kind of in a holding pattern, similar as you are, waiting to see how this nets out. You know, we're gonna let this play out for a little bit longer, and then, you know, obviously, we'll reach out and see if there's anything that we can do to help.

Under no circumstances is this programming required for us given the retention levels that we've seen. It's certainly something we would love to return, though.

Nicholas Zangler (Equity Research Analyst)

Got it. Just a longer-term question for you. That subscriber guide, for the year in 2023 relative to your goal of 2 million that you're aiming for it in 2025. I think you might need like a 15% CAGR from 2023 and beyond to get to it. You're calling for 10% growth in 2023. The question is, following 2023, are you banking on acceleration of cord cutting? Are you banking on market share gains? For the 10%, I know it's the underlying growth, but that 10% that you're guiding for this year, does that include, you know, any weight on it by like recessionary concerns?

Like, do you think, you know, it could have been higher, but like given the macro and what you're seeing right now, you wanna be a little bit more conservative in that guide? Thanks.

David Gandler (Co-founder and CEO)

Yeah. again, don't hold me to this. I believe, you know, for the eight to 10 or 11 quarters that we've been public, we've beat, you know, I would say almost all of them except for two. The two that I believe we did not beat were the Q1 and Q2 numbers. as I said, there is some noise in that first quarter number, which has about five items that I think could have some impact. Material or not, that will be evident in the next few days for us. as for the year, we feel very comfortable. There are still 60 million+ households that have cable. as you know, our job is to pull from that existing market.

If you, again, look at our fourth quarter numbers, you'll see that we are continuing to take a disproportionate share of customers into the vMVPD space relative to the reporting companies that you've heard from, very recently. You know, from our view, you know, we're gonna continue to take share. You know, the 2025 number you just mentioned is something that I don't think is very far off from our current pace. I do anticipate that as the product continues to improve, we continue to focus on more profitable customers that, you know, we think that there will be some re-acceleration over the course of that period.

Nicholas Zangler (Equity Research Analyst)

Got it.

John Janedis (CFO)

Nick, I wanna add also just as we look to the end of the year, we are gonna be launching our unified platform, and I would just say that I think it gives us some opportunity to more or less expand the funnel, to then drive more subs coming through. You'll, I think, start to see that, if not end of this year timing-wise, very early next year, but probably sometime later this year.

David Gandler (Co-founder and CEO)

Yeah. The only other thing I would add is that if you look at our, you know, our paid marketing numbers, you'll see that we're continuing to acquire customers at the same level that we've acquired them three years ago, which is roughly a one to 1.5x first month's ARPU. That number continues to fluctuate closer to the low end of that range. Again, we're very comfortable. You're seeing leverage on that line. You know, there's certainly room. We've also grown 3x since going public. I think we went public with about 550,000, maybe less customers. And now we're in North America at 1.445 million.

You know, we've seen slower growth when we went public initially, and we've seen a re-acceleration. Again, this is just one quarter. We're very comfortable. The World Cup pulled forward, which is something we expected. We didn't expect it to the degree that it that we actually delivered. Again, we're very comfortable. We've got solid product supported by the J.D. Power ranking number one with within the live TV streaming category. We continue to double down on our brand, which is sports-focused and differentiate there. We're doubling down on our, on our product capabilities. You know, I mentioned some of the AI stuff that we're working on, which will allow us to really develop a little bit more interactivity.

Hopefully, there'll be some testing that will be available to customers towards the end of this year. We're continuing to differentiate on the content side as well, adding in the Bally's RSNs to super serve sports fans. All aboard, I don't think there's anything that would make me feel uncomfortable with respect to hitting the 2025 target.

Operator (participant)

Your next question comes from the line of Jim Goss from Barrington Research. Your line is open.

Jim Goss (VP and Senior Investment Analyst)

All right. Thank you. As Warner Bros. Discovery approaches the launch of its combined HBO Max-type service that could have Turner Sports programming, is there any opening that you might have to create a deal with them to create an add-on service that would deliver both the sports that you've thought of that has seemed too expensive, but also would deliver added content sort of as an add-on, as an incremental bonus value to them, value to you?

David Gandler (Co-founder and CEO)

Yes. Jim, this is David. Well, first I'll say that, you know, we have a deal with Discovery that does not include Turner. If you recall, we dropped Turner when Turner was under the AT&T umbrella. We haven't had conversations yet with the Discovery team. We would love to carry Turner. Obviously, that would have to be accomplished at a level that we feel makes sense given our subscriber-related expense line. But what's also interesting is that, as I've said previously, we only need about 80% of the gross rating points. We're open to doing deals. We're open to optimizing our bundle costs and delivering the best content portfolio and product that we can to our customer base.

You know, hopefully, that conversation, will take place, at some point. Obviously, our teams are constantly speaking to all the content providers on a regular basis. We'll keep you posted should there be any change there.

Jim Goss (VP and Senior Investment Analyst)

Okay. Secondly, with the difficult World Cup comp, is there any way to carve out like subscriber attribution for that particular aspect to that. I guess it was a little bit implied in some of the normalization of the changes year-over-year and quarter-to-quarter. How many do you think joined more for that than anything else?

David Gandler (Co-founder and CEO)

You know, I don't know if we have an exact number. You know, I would say that, you know, again, there was several things that were happening in the fourth quarter. We had a strong NFL end to the season for us. By the way, not impacted at all by Thursday Night Football either, which really speaks to the power of the platform. I would say that. Look, it's tough to say right now because so many of our Let me put it this way. When I think back to the 2018 spring cohort, you know, for the 2018 World Cup, you know, I can tell you that the churn level based on the first few weeks was significantly higher in 2018 versus 2022.

The second thing I'll say is that the types of customers that came in in 2018 came in only to watch the World Cup. What we're seeing, this is probably why I'm feeling a little bit more comfortable with our initial Q1 retention numbers, is that these World Cup customers are actually watching other programming as well. This is new territory for us. We're just kind of, again, being a bit conservative. I would say it's probably in the, you know, I would say maybe low to mid-teens maybe, you know, in terms of that cohort. That's just a clean, I would say, World Cup cohort, but clearly it drove strong growth particularly in the beginning of the World Cup.

Those users typically stay on longer than the ones that just come in for the final. Again, tough to actually quantify at the moment.

John Janedis (CFO)

Yeah. Jim, maybe I can help you a little bit more with that. I think it may be too soon to know. What we had the team look at was the number of subscribers that actually watched, say, more than a certain number of hours in the FIFA World Cup. I think it's too soon to know how many of those have churned off yet because, you know, they may not churn off for a while, they may not churn at all. To David's point, in terms of that double-digit number, I think in terms of the as a percentage of of sub growth for the fourth quarter, it was probably somewhere in the low to mid tens of thousands.

Operator (participant)

I will now turn the call over to Ms. Alison Sternberg.

Alison Sternberg (SVP of Investor Relations)

Thank you, operator. As part of today's Q&A session, we have partnered with Say Technologies for the first time in order to open up a new shareholder Q&A platform. This allows all of our shareholders to submit and upvote questions to management. We elected to use this platform because we really wanted to make sure that all of our shareholders have a voice and are empowered to engage with us. We decided to focus on answering a handful of questions that were top-ranked on the platform. David, I'm gonna direct these to you. Our first question that got a lot of upvotes, was the following: Where do you see the future of Fubo going?

David Gandler (Co-founder and CEO)

Oh, wow. That's a very broad question. You know, look, I think that there are two very strong trends here. One is that we're continuing to experience the secular decline of traditional television. You know, Fubo continues to take a disproportionate share of customers in a very competitive field. You know, again, hitting that $1 billion revenue milestone coupled with $100 million of advertising sales, these are really strong numbers. We're very confident about the future. Our product, again, is probably, I would say, one of the best products in the world relative to what I've personally used and tested. We're continuing to really improve that both with our team in France as well, as our team in the U.S.

Our newest team, which is the team of Edisn.ai, which is now Fubo India, which is continuing to innovate around the product to really deliver an interactive experience and provide users with some really, you know, strong metadata to be able to discover content in better ways, to be able to interact on a sort of play-by-play basis versus on a per game basis. We're doing lots of interesting things. We're obviously very relevant. Customers are, you know, voting with their wallets. We have almost 1.5 million customers at the end of the year in North America. You know, we're seeing great growth in France from Molotov.

When we unify our platform, we think we continue to be able to absorb more cost-cutting measures, be more efficient, and also increase product velocity. I'm very bullish. I don't know if there are many companies like us that are performing and executing the way we are, and at the same time delivering a product that people love. I feel like we're in a very good position for growth, and I'm very confident in 2023 and also reaching self-sustainability in 2025.

Alison Sternberg (SVP of Investor Relations)

Thanks, David. second, question that got a lot of upvotes on the platform was related to the competitive landscape. Specifically, what is Fubo going to do to compete with the likes of Hulu and other streaming services?

David Gandler (Co-founder and CEO)

Look, this is a question that people have been asking us since 2015 when we were probably 2% or 3% of subs of, you know, a company like Sling, for instance. You know, we're continuing to take a disproportionate share. I've said that numerous times now. I'm not sure it sinks in that we're doing that. We are growing faster than the virtual MVPD space. We're gonna continue to grow quickly. We have a, I would say, differentiated content offering, and a differentiated product, and people are choosing Fubo every single day. You know, I think that we're competing across three vectors as I've just stated. One, on brand. We are clearly sports-focused. Customers choose us first for the sports.

That's evident in downloads of certain apps or of our app, frankly, during a big sporting event days or beginning of a season. You'll see that in the NFL, and you'll see that during World Cups and other major events. And we're also differentiating on product, and that's the one where I think is the toughest for other companies because this is our DNA. We're a product technology company similar to a Netflix or a Spotify. Over the long term, I think that we will be one of the leading players in the space in the United States for sure, and with the potential opportunity, you know, five, 10 years from now to do this globally. We're positioning ourselves for the future.

We're excited about our business and excited about our ability to drive value for our media partners and drive, you know, excellent experiences for consumers.

Alison Sternberg (SVP of Investor Relations)

Great, David. Thank you for that. Big thank you to our shareholders for your engagement and your thoughtful questions on the SAY platform. I'm now gonna turn it back over to the operator.

Operator (participant)

This does conclude today's conference call. Thank you for your participation. You may now disconnect.