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'Burned Through' Cash

FuboTV Seeking Gaming Platform Partner as Costs Rise

FuboTV is looking for a partner for Fubo Gaming, said CEO David Gandler on a Thursday earnings call. The company's online sports wagering business is “under strategic review,” and the time period to develop the wagering business is “significantly longer than investors have an appetite to wait for today,” he said. The stock closed 16.8% higher Friday at $3.47.

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FuboTV decided to enter the wagering business in early 2021 “when the business climate and efficient cost of capital provided the runway to develop new business lines with longer profitability time horizons,” Gandler said. With inflation hitting 40-year highs, “that no longer holds true,” he said: “We recognize that the market has changed.”

The company continues to be bullish about its integrated wagering platform combining live TV and a wagering sportsbook, and Gandler hailed Fubo’s recent submission to the New Jersey Division of Gaming Enforcement for approval to operate in what he called the second largest U.S. market in mobile sports betting. The company expects the state's approval in time for the 2022 football season.

It also expects to launch an additional market in coming weeks, bringing Fubo Sportsbook availability to four states; it has 10 or 11 market access license deals in place, Gandler said. “We will look for opportunities to partner with other companies,” he said, noting the interactive features it built with "pick’em" games on the Fubo platform. “It could be quite compelling” for a partner “looking to quickly get into the business” with an existing subscriber base, he said.

FuboTV lowered full-year North America revenue guidance to $910 million to $930 million, from its May projection of $1.02-$1.03 billion, said Chief Financial Officer John Janedis. Revised guidance takes into account the impact of Fubo’s “subscriber shortfall” in Q2 and “additional conservatism in our outlook based on the changing macro environment,” Janedis said. Revenue guidance for Q3 is $200 million-$205 million.

Q2 revenue was $222 million vs. guidance of $220 million-$225 million and analysts’ consensus of $227 million. North American subscribers grew 41% year on year but was below expectations at 947,000 vs. the company’s guidance of 965,000. Gandler attributed the falloff from 1 million in Q1 to seasonality.

Wedbush analyst Michael Pachter said in a Friday investor note that fuboTV’s lowered guidance for the remainder of 2022 takes into account “a difficult macroeconomic environment,” but he noted Fubo “burned through over $90 million of cash” from operations in Q2 and has about $380 million cash remaining. The company can act to conserve cash, “notably by growing revenues and by eliminating further investment in its wagering business,” Pachter said, “but it is far from clear that the company has sufficient cash to last until the end of 2023.”

FuboTV grew its free ad-supported television (FAST) channels to 40 in Q2 to help drive long-term ad average revenue per user growth, Gandler said, and it expects to grow the FAST offerings to 100 by year-end. Subscription ARPU grew 2% in the quarter to $64.51; advertising ARPU dropped 18% to $7.25.

On the macroeconomic environment, Gandler maintained FuboTV is in a strong position as consumers cut the cord and move to streaming due to high traditional pay TV costs. “I would argue that the worse the economy gets, the less discretionary income available, I think people will actually start to really consider moving from traditional television to streaming,” he said, focusing on a “very strong sports calendar highlighted by the NFL.” He cited 65 million-68 million subscribers “still in the traditional ecosystem,” plus consumers stacking multiple “+” streaming services, which, he said, "are becoming somewhat burdensome and costly.”

Commenting on large tech companies' growing presence with live sports streaming rights, Gandler noted Apple’s recent news release about securing rights to Major League soccer referenced availability on other platforms such as Vizio and LG TVs. “That tells you that it's very difficult for even the largest companies in the world to maximize the value of any one piece of content,” Gandler said.