fuboTV Inc. (FUBO) Earnings Call Transcript & Summary

Hello, and welcome to the fuboTV business update. [Operator Instructions] I would now like to turn the conference over to Ameet Padte, SVP of FP&A, Corporate Development and Investor Relations. Please go ahead.

Thank you. Good morning, and thank you all for joining us to discuss this morning's announcement. With me today is David Gandler, Co-Founder and CEO of Fubo; and John Janedis, CFO of Fubo. An accompanying presentation can be found on the Investor Relations section of our website at ir.fubo.tv. Before we begin, I would like to remind everyone that the following discussion may contain forward-looking statements within the meaning of federal securities laws, including but not limited to, statements regarding the combination of Hulu + Live TV and Fubo and related transactions, our anticipated structure and operational and financial performance following the combination, anticipated fourth quarter and full year 2024 results, and our settlements with the Venu Sports' partners. 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 as well as the 8-K filed this morning in connection with the announcement. During the call, we may also refer to certain non-GAAP financial measures. Further information on these non-GAAP financial measures is available in the accompanying presentation. Please also note that the company will not be addressing any questions regarding fourth quarter 2024 performance. With that, I'll turn it over to our CEO, David Gandler.

Thank you all for joining us today. I'm thrilled to share that this morning, we announced that we have signed an agreement with The Walt Disney Company to combine its Hulu + Live TV business with Fubo. This transaction represents an incredible opportunity to build a consumer-first live TV streaming company. Upon close, Disney will hold a 70% interest in Fubo, with Fubo's shareholders owning the remaining 30%. The combined business will operate under the Fubo publicly traded company and will be led by Fubo's management team. At deal close, our company is expected to become immediately cash flow positive, instantly making Fubo a major player in the streaming space. With over 6.2 million subscribers in North America and over $6 billion in revenue, Fubo will be well positioned to fairly compete with our peers. In connection with this agreement, we have announced the signing of an amended carriage agreement with Disney effective immediately, enabling us to deliver flexible, innovative, and competitive content packages to consumers, particularly around sports. As a result, we have settled all litigation against Disney, Fox, and Warner Bros. Discovery, the Venu Sports' partners. This agreement also provides $220 million in immediate cash plus $145 million in committed financing available in January 2026, enhancing our liquidity. This ensures we can continue investing in our business and close out our 2026 convertible notes without diluting equity holders. We are delighted by today's outcome. Fubo's increased scale means we have the flexibility to pursue diverse growth strategies, opening up a range of opportunities, both domestically and internationally. We will also be able to further realize our super aggregation strategy through the continued offering of the separate Fubo and Hulu + Live TV brands. Hulu + Live TV will remain an entertainment-focused cable replacement service, while Fubo will continue to be focused on sports and news. Fubo will now be able to provide even more sports, including ESPN+ through amended distribution agreements with Disney as well as Fox. And crucially, Fubo has the potential to create skinnier sports news and entertainment bundles according to consumer needs. Fubo's strengthened position also means we expect to negotiate improved content licensing agreements with all programmers. With more competitive licensing terms, we expect to return money to consumers in the form of increased value and better content offerings. We are also pleased with our performance in 2024, and based on preliminary results, expect to deliver fourth quarter revenue and subscribers within our previously issued guidance range. Since Fubo's beginning, our goal has been to offer a streaming product with choice, competitive pricing and more innovation with fair competition for the benefit of consumers. We believe today's news demonstrates that we're delivering on that promise to build a better product for consumers with more packaging flexibility, more content offerings, increased innovation, fair pricing and more choice. And most importantly, we believe we are 1 giant step forward to realizing our vision of being a player in a competitive industry where consumers will win. With that, I will turn it over to John.

Thank you, David, and good morning, everyone. We are very excited to bring these companies together. As David mentioned, upon close, Disney will hold a 70% interest in NewCo with Fubo shareholders owning the remaining 30%. This equity split accounts for on- and off-balance sheet assets and liabilities, including the value of Fubo's net operating losses. At closing, the combined company is expected to have over 6.2 million subscribers in North America and over $6 billion in revenue. By 2028, the combined company is projected to have revenue of over $7.5 billion and a run rate adjusted EBITDA of over $550 million. Importantly, the terms of the transaction include a cash injection to Fubo of $220 million upon signing. In addition, Fubo is provided with a $145 million senior unsecured term loan available in January 2026 at attractive terms. This will provide added financial flexibility to our balance sheet ahead of the February 2026 maturity of our convertible notes. The transaction also includes a termination fee of $130 million payable to Fubo under certain circumstances, including if the transaction does not close. With the $220 million cash injection and cash on hand, Fubo will start 2025 with more than $1 per share of cash on our balance sheet, resulting in an enhanced credit profile, affording the company a more flexible capital allocation strategy. I also want to congratulate our team on our strong performance. As David noted, based on preliminary results, we expect to report North America and Rest of World revenue and subscribers for the fourth quarter and full year 2024 within our previous guidance range. With that, we will now open it up for Q&A. Operator?

[Operator Instructions] Your first question comes from the line of Clark Lampen with BTIG.

John, I wanted to see if you could give us any update on the timing of some of the content licensing agreements that you guys have coming up in front of you. Pro forma, is that something that we might be able to see addressed in '25, '26? Is it later stage? How many of those have been recently renewed and sort of nailed down?

Yes, sure. Clark, look, as you know, we don't get specific on licensing agreements and timing. What I can tell you is, as you saw today, we have new license agreements with a couple of companies, meaning Disney and Fox. Beyond that, we tend to have 1 or 2 agreements that come up annually, but I can't give you more than that.

The next question comes from Kutgun Maral with Evercore ISI.

First, David, for the last decade, you've been building and operating this company in a sea of much bigger players. Together with Hulu + Live TV, you'll become one of the largest and perhaps fastest-growing pay TV distributors in the U.S. So as your place in the ecosystem shifts so meaningfully, can you talk a little bit about how you expect your operating philosophy or strategy and opportunities ahead will shift under this new scale and structure? I know you called out a number of diverse opportunities and hinted at something perhaps internationally. Any other color would be appreciated.

Yes. Thank you for your question. You're right. We have been operating very efficiently, very effectively over the last 10 years. But this today, this announcement is a very exciting moment not only for the company, its shareholders, but more importantly for consumers. $6 billion of revenue, a growth profile like ours allows us to really leverage capabilities that our new partner can offer. So a scaled business means we'll have -- be able to negotiate better programming deals, which will result in further flexibility and really give us a chance to build a business that consumers are interested in, and I think that will make us a very competitive player. We also feel that there's opportunities around our advertising business, given our partner's scale. To be able to be part of something like that, I think, will also create significant value around the advertising business. There are marketing efficiencies. And I think one of the most valuable pieces of this is that Hulu + Live TV is embedded within the Hulu product, which has significant advantages particularly around retention. So being able to really access a lot of these resources will create an expansive array of opportunities, both across -- it could be selective programming opportunities in terms of acquisition. Clearly, around growth, we have now better opportunities and more money to focus on promotional pricing to really drive growth. I think overall, this is going to create a very competitive and exciting environment, and we're preparing ourselves for our growth stage.

The next question is from Michael Pachter with Wedbush.

I did not ask to place a question so let's pass.

Your next question comes from Laura Martin with Needham.

Congratulations, what a big deal. Congratulations. When you think about the revenue opportunity and the cost savings, does this help you -- does this make you more competitive on the gross margin, do you think, from combining these 2 companies? Given that you're so many more subs now, you should scale up in terms of helping with the content cost for your negotiations going forward?