On March 25, Fubo Group (03738), the world's leading digital content asset protection and trading software service provider, announced its 2023 annual results: during the period, the company's total revenue exceeded the 2 billion milestone and achieved revenue of 2,001 billion yuan (unit: HKD, same below), up 39% year on year, up 42% year on year without considering exchange rate changes; adjusted EBITDA was 319 million yuan, up about 7% year on year.

According to the Zhitong Finance App, the steady growth in performance shows that Fubo Group maintains its strategic strength, deepens service penetration and content coverage for leading content parties, and continues to increase business upgrades to continuously consolidate the foundation for steady growth.

Strong growth in the main business drives the improvement of profit quality

In 2023, Fubo Group's main business grew strongly, driving a significant improvement in profit quality, and the growth logic continued to be implemented.

By business, the company achieved impressive growth in subscription services. During the period, revenue from the business reached 868 million yuan, up about 58% year on year, accounting for about 43% of total revenue; revenue from value-added services was 1,133 billion yuan, up 27% year on year, accounting for about 57% of total revenue.

By market, the domestic market continued its strong growth trend during the period, with revenue reaching 1.02 billion yuan, up 44% year on year; the North American market progressed steadily, with revenue of 983 million yuan, up 33% year on year.

On the profit side, in 2023, the company's gross profit was 850 million yuan, up 43.8% year on year; gross margin was 42.5%, up about 2 percentage points year on year. Among them, the gross profit margin for the second half of 2023 was 45.8%, an increase of about 7 percentage points compared with the gross profit margin of 39.2% in the first half of the year. Although there are still challenges due to factors such as the external economic environment, while the business scale effect continues to be unleashed, Fubo has consciously chosen a higher quality development strategy to promote a steady increase in the gross margin of the Fubo Group.

At the cost level, Fubo Group will vigorously increase R&D in 2023, leading the AIGC (generative AI) industry at the cutting edge of transformation and development, giving priority to investing resources in strategically important key areas, and focusing on R&D at the cutting edge of content authorization technology. During the period, the company spent 232 million yuan on R&D, a year-on-year increase of 74.4%.

According to the Zhitong Finance App, Fubo Group has set up a new R&D and operation center to explore and cooperate with the University of Florida in the field of artificial intelligence technology applications to develop digital content authorization technology and solutions in the field of AI. At present, the operation center is on the right track of operation, and Fubo Group's technology and product development in AI-related fields is about to enter a harvest period.

According to information, Fubo Group has gradually optimized business process efficiency through large-scale model products. By integrating multi-modal large model capabilities, the company's text reasoning and understanding efficiency in automated content review scenarios can be improved. Furthermore, in terms of overseas content business, the company has greatly improved the efficiency of workflow processes such as automatic recognition of video subtitles and multi-language translation through the integration of AI tools, effectively improving the efficiency of the content monetization business.

Considering investment in R&D, it helps to form economies of scale and further enhance the company's competitiveness and market share. In the long run, it is of great positive significance in seizing the leapfrog development opportunities of generative AI.

It is worth noting that Fubo Group's liquidity has increased markedly, and its financial market is secure. By the end of 2023, the company's balance ratio was 18%, down 13 percentage points from the previous year; the current ratio was 2.0 times, compared to 1.2 times in the same period last year. The ability to repay long-term and short-term debts has been greatly improved, greatly improving its ability to defend against risks. The capital chain is healthier. It is a positive achievement of the Fubo Group's qualitative development, and also provides strong support for it to seize the growth dividends brought about by the AIGC transformation.

The company accelerated R&D technology investment in the generative AI industry in the second half of the year, and the annual financial expenses of 91 million were incurred due to the acquisition of particles. The adjusted net profit was 37.41 million, the net interest rate was 2%, and the net profit was close to breakeven.

The iterative transformation of AIGC technology and the first-mover advantage in content creation are clearly welcoming explosive opportunities

As the world's leading digital content asset protection and trading software as a service provider, Fubo Group has continuously consolidated its business foundation and enhanced its technical advantages since its inception.

With the continuous accumulation of core digital rights and trading capabilities, we are making every effort to build the necessary technical infrastructure for digital content asset protection and trading, and provide copyright protection, operation management and monetization services for content and copyright parties; connect diverse platforms to reduce the risk of platform infringement, output API services, etc., to provide platform-based customers with standardized services based on digital fingerprinting and digital watermarking technology to help them establish a complete copyright management system. Based on this, it creates value for both upstream and downstream parties and the entire digital content protection industry chain.

According to the Zhitong Finance App, Fubo Group's digital content asset protection and trading services are not only a value business based on stock space, but also have huge room for growth. In particular, in the context of content creation of iterative changes in AIGC technology, the market demand for effective copyright management and authorization mechanisms has further increased dramatically. Fubo's core digital authorization capabilities and mature service model are expected to open up more impressive new services and application scenarios, thereby opening up huge business incremental space to help customers maintain the core value of digital content assets in the ever-evolving content production and distribution pattern.

The release of Sora means that AIGC has accelerated its entry into the video generation stage. The Koshi Lightyear Think Tank has updated the timeline for the mature application of generative AI technology. In 2024, it is possible to generate a first version of a short video based on text prompts. In 2025, it is expected that a first version of a long video can be generated based on text, and actually used and implemented in the video production process. iResearch predicts that in 2030, the scale of China's AIGC industry is expected to exceed 1 trillion yuan, reaching 1144.1 billion yuan.

According to the Zhitong Finance App, the core logic of Fubo's business is expected to achieve strong growth in the AIGC era, mainly in the following three aspects:

First, large content parties are still the most important stakeholders in the AIGC era, and Fubo Group has provided them with in-depth services for many years. Fubo Group achieved coverage of leading content parties at home and abroad. Furthermore, the company's customer retention rate is extremely high, reaching over 98%. There are deep barriers to quality customer resources.

Second, the copyright industry is based on rules and laws, and requires technical services to ensure the continued effectiveness of rules. Since 2020, Fubo Group has been deploying AI-related technology. With continuous accumulation of comprehensive advantages, Fubo Group will seize generative AI development opportunities, promote the implementation of copyright services for major content parties in the AI field, provide customers with systematic solutions in the generative AI era, and seize business upgrade opportunities to achieve leapfrog development. Fubo Group's R&D and operation center in Florida, USA, will help it continue to consolidate its technological advantages, refine its infrastructure capabilities in the AIGC era, and ensure that it continues to provide customers with reliable certification and monetization services.

Third, Fubo Group will provide services for content parties to manage copyright use and transactions in the AI field to obtain split revenue. This will accelerate the formation of Fubo's content protection and monetization service infrastructure capabilities and promote the Group's leapfrog development.

In short, Fubo Group has been deeply involved in the digital content industry for many years, has high barriers to video fingerprinting and watermarking technology, rich customer resources at home and abroad, and a first-mover advantage to help the strongest players thrive. In the future, the increase in digital content brought by AIGC will open up a wider market space for the company.

Summary: Industry trends and technology applications resonate, and ecological results are showing at an accelerated pace

Artificial intelligence has become an important driving force leading a new round of technological revolution and industrial transformation, and a key engine for high-quality economic development. According to data released by the China Academy of Information and Communication Technology, China's core artificial intelligence industry reached 578.4 billion yuan in 2023, with a growth rate of 13.9%, showing a rapid development trend and broad market space.

Fubo Group has taken a multi-pronged approach to seize the AI explosion bringing revolutionary development opportunities to the global digital content industry. In terms of R&D, the company set up an R&D center in Florida to actively explore AI technology; in terms of data, the company is building the world's largest audiovisual content fingerprint database, which on the one hand is expected to enhance the company's ability in data authorization, and on the other hand, it will help content parties strive to maximize content monetization value; in the application direction, the company launched AIGC video technology service product, Yuanfan Cloud, to provide complete AIGC services for digital content creators and creation platforms.

Simply put, Fubo Group is building an AI digital content ecosystem service circle through technology, services and applications. With the overall development of the digital content industry, ecological results are expected to accelerate.

In summary, the high growth rate of Fubo Group's performance continues, confirming the logic of growth. AI will lead the new development of the digital content industry and resonate with the company's digital watermarking technology application, and will create a new growth curve for Fubo Group. Under the advantage of leading players, the pattern of the strong will be further highlighted.