Despite losing streaming subscribers compared to the first quarter, virtual MVPD Fubo posted revenue gains and curbed costs in the second quarter, and executives expressed optimism over early signs of an advertising rebound.
Fubo’s sports-centric live TV streaming platform posted 1.16 million North American subscribers at the end of Q2, a decline of roughly 113,000 compared to the 1.28 million it had at the end of Q1. Still, the subscriber figures were better than Fubo had anticipated and reflects a 23% year over year bump from a year ago. And while Fubo counted fewer subscribers than in Q1, it saw revenue climb 41% year over year to $305 million. Helping drive revenue gains was a double-digit expansion in domestic monthly average revenue per user (ARPU), climbing 13% compared to Q2 2022 to reach $81.62 – an all-time high for the company. Those gains came on the back of significant price bumps to Fubo’s platform earlier this year, as it raised base prices and implemented a regional sports network (RSN) fee to support expanded local coverage.
Fubo’s total revenue reached $313 million in Q2, also up 41% over the prior year period. Alongside revenue gains Fubo marked year over year progress towards profitability. The vMVPD’s Q2 Adjusted EBITDA loss of $30.5 million improved by $40 million, and free cash flow improved by $9 million compared to Q2 2022. It also curbed net losses, which reached $54 million in the period, marking a $41 million year over year improvement.
The company touted a 7% gross margin, and optimized content costs with reductions in subscriber-related expense. In a letter to shareholders, Fubo said better-than-expected subscriber growth reaffirms its pricing power in the market and appeal of the sports-first streaming offer. And it pointed out efforts on operating more efficiently, reducing total sales and marketing as a percentage of revenue from roughly 13% to 11%.
On the back of strong results, Fubo upped its full-year guidance for North America, now expecting between 1.56-1.58 million subscribers for 2023 and $1.26-$1.28 billion in revenue.
Progress on advertising
Despite a challenged ad market, Fubo grew North American ad revenue 5% year over year to $22.8 million and expects positive momentum in the second half of the year as advertising spending recovers.
“We are very encouraged as green shoots in July indicate an advertising rebound and a sizable ad recovery for the back half of the year,” said Fubo CEO David Gandler on Friday’s second quarter earnings call.
On the ad front, Gandler pointed to investments in both its ad sales team, technology and infrastructure, with accelerated direct sales and reworking deals to offset pricey third-party programmatic fees as it optimized programmatic supply chain routes. Because of those improvements it expects to grow advertising ARPU year over year through the second half of the year and beyond. Political spending for the upcoming election cycle could also prove to be a boon.
“The ad inventory provided by our leading local sports coverage offers brands targeted reach both nationally and regionally,” Gandler said. “Our targeting capabilities also strongly positioned Fubo to leverage the upcoming political season, which is expected to top $11 billion in total ad spend across the industry in 2024.”
Asked by investment analysts whether the positive signs in July were industry wide or more Fubo-specific, Gandler said it was more of the latter. He pointed to a shift by the vMVPD earlier this year to focus on growing direct ad sales, which it’s benefiting from as that method becomes a larger part of its overall mix across direct response, direct sales and programmatic.
“We saw a little bit about that at the end of June but was really nice to see that it was sustained well into July with some really robust numbers,” he commented. “Which gives us confidence that third quarter, and potentially the fourth quarter, again with local sports, with the NBA and the NHL starting up, I think will allow us to continue to drive CPMs.”
Fubo CFO John Janedis also weighed in, citing cautious optimism on the ad market, but saying that on a year over year basis for July Fubo is seeing “pretty dramatic growth" on the direct front. And on top of that, the money only four days into August “is already larger than what we did for the month of July,” he said.
Reviewing deals around supply chain routes and significant fees ad-tech partners take is also a factor, with Gandler saying Fubo feels it should be getting much better terms than it has been given the high-quality inventory the platform provides.He added that on the advertising front, the company hasn’t seen this level of improvement possibly since 2020.
Overall, Fubo’s finance chief emphasized that Fubo believes it’s benefiting from growth within CTV alongside subscriber gains, and an upheaval in linear.
And executives believe Fubo will be largely insulated from impacts of the ongoing Hollywood actor and writers strikes thanks to its live sports-heavy content lineup, which could also become more attractive to advertisers if it’s prolonged and there’s less premium content.