FuboTV's stock dives as excessively high licensing costs led to loss of content

By Tomi Kilgore

Fubo customers lost Warner Bros.'s Discovery Networks programming 'only a few days ago'

Shares of FuboTV Inc. reversed course to trade sharply lower Friday, after the sports-first TV-streaming company reported a first-quarter loss that was only half what was expected, but said monopolistic, extremely high content costs led to the loss of some programming.

Co-Founder and Chief Executive David Gandler said on the post-earnings call with analysts that the company continues to be challenged by "excessively above-market content licensing costs," and other contractual terms imposed by programmers.

"In the first quarter, we spent approximately 90% of our total revenue on content," Gandler said, according to an AlphaSense transcript. "The exorbitant fee imposed on us and consequently on our customers are well above the market."

He said those issues are at the core of Fubo's (FUBO) current antitrust lawsuit against Walt Disney Co. (DIS), Fox Corp. (FOX) and Warner Bros. Discovery Inc. (WBD).

Read: FuboTV CEO slams 'pernicious' rivals Disney, Fox and WBD amid streaming lawsuit.

The company said it continues to believe in the merits of its lawsuit, and is "encouraged" by the setting of a hearing date for a preliminary injunction motion on Aug. 7.

It may be no coincidence, that Gandler said "only a few days ago," Fubo customers lost programming from Discovery Networks, which is owned by Warner Bros.

" While negotiating a renewal, we also requested to license the Turner Sports Networks and asked for flexible packaging, the same packaging we expect the JV will offer," Gandler said. "WBD did not want to discuss terms."

He said Warner Bros. only offered an extension of the status quo at above-market costs.

The stock had run up as much as 9% to a two-month high moments after the opening bell, before pulling a sharp U-turn. The stock slumped 8.7% in midday trading, to put it on track to snap a five-day win streak, which was the longest such streak since the five-day stretch that ended Sept. 29, 2023.

For the first quarter, the company said net losses narrowed to $56.3 million, or 19 cents a share, from $84.3 million, or 37 cents a share, in the same period a year ago.

Excluding nonrecurring items, the adjusted per-share loss of 11 cents beat the FactSet loss consensus of 22 cents. That extended Fubo's streak of bottom-line beats to five quarters.

Gross margin improved by 5.88 percentage points to 7%.

Revenue grew 24% to $402.3 million, above the FactSet consensus of $381.3 million, to beat expectations for the seventh straight quarter.

North America subscribers rose 18% to 1.511 million, above previously provided guidance of 1.415 million to 1.435 million. For the rest of the world, subscribers grew 5% to 397,000.

For the second-quarter the company is projecting NA subscribers to rise 10% to 1.275 million to 1.295 million and revenue of $356.7 million to $367.5 million, which compares with the current FactSet consensus of $355.3 million.

The stock has tumbled 55.5% year to date, while the S&P 500 index SPX has gained 7.5%.

-Tomi Kilgore

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05-03-24 1249ET

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