fuboTV Inc. Form 10-Q Summary
Business context and reporting period
fuboTV operates a sports-focused live television streaming platform offering sports, news and entertainment content in the United States, Canada, Spain and France. The filing covers the quarter ended March 31, 2023, with comparisons to the quarter ended March 31, 2022. Fubo operates as one continuing streaming segment. Fubo Gaming and Fubo Sportsbook were dissolved and terminated in October 2022, respectively, and are presented as discontinued operations.
Key financial metrics
| Metric | Q1 2023 | Q1 2022 | Change |
|---|---|---|---|
| Total revenue | $324.4 million | $242.3 million | +$82.1 million, approximately 34% |
| Subscription revenue | $300.9 million | $219.2 million | +$81.7 million |
| Advertising revenue | $22.7 million | $23.2 million | -$0.4 million |
| Operating loss | $81.5 million | $123.0 million | Improved by $41.5 million |
| Net loss from continuing operations | $83.4 million | $128.4 million | Improved by $45.0 million |
| Net loss attributable to common shareholders | $83.6 million | $140.7 million | Improved by $57.1 million |
| Basic and diluted loss per share | $0.37 | $0.89 | Improved by $0.52 |
| Gross profit | $3.2 million | $(23.6) million | Improved by $26.8 million |
| Gross margin | 1.0% | (9.8)% | Improved by 10.8 percentage points |
| Net cash used in operating activities | $78.2 million | $124.9 million | Improved by $46.7 million |
Subscription revenue growth reflected approximately $59.2 million from subscriber growth and $22.5 million from higher package prices and attachments. Advertising revenue declined because of fewer impressions sold, partly offset by higher CPMs. Subscriber-related expenses increased $55.7 million to $301.4 million, primarily from higher subscriber levels and contractual content distribution rates.
Paid subscribers increased to approximately 1.3 million in North America and 0.4 million in the rest of the world at March 31, 2023, compared with 1.1 million and 0.3 million, respectively, a year earlier. North America ARPU increased to $76.79 from $71.43, while rest-of-world ARPU decreased to $6.57 from $7.63.
Financial position, cash flow and debt
- Cash and cash equivalents were $358.7 million at March 31, 2023, compared with $337.1 million at December 31, 2022. Cash, cash equivalents and restricted cash totaled $364.8 million.
- Working capital, excluding discontinued operations, was $65.0 million. The company reported an accumulated deficit of approximately $1.6 billion.
- Total liabilities were $860.2 million and shareholders’ equity was $437.8 million at March 31, 2023.
- Outstanding indebtedness was approximately $410.1 million, including $402.5 million of 3.25% convertible notes due 2026 and approximately $7.6 million of other notes and borrowings. The balance-sheet carrying value of the convertible notes was $394.7 million.
- Operating cash outflow from continuing operations was $77.0 million. Investing cash outflow was $3.9 million, including $3.8 million for internally developed software. Financing cash inflow was $103.7 million.
- The company sold 71.4 million common shares through its at-the-market program during the quarter, generating approximately $106.1 million of net proceeds. Approximately $198.7 million remained available under the program at March 31, 2023.
- Future disclosed commitments included approximately $62.8 million of operating lease payments, $31.8 million under annual sponsorship agreements and $98.6 million under sports rights agreements.
Material changes versus the prior comparable period
- Revenue increased approximately 34%, driven almost entirely by subscription revenue, while advertising revenue was broadly flat to slightly lower.
- Gross margin turned positive as revenue growth exceeded the increase in subscriber-related expenses.
- Operating and continuing-operations net losses narrowed substantially, aided by lower general and administrative expense, lower depreciation and amortization, and lower net other expense.
- General and administrative expense decreased $12.0 million, primarily due to lower sales tax accruals, payroll, stock-based compensation and professional fees.
- Operating cash burn improved materially, although the company remained substantially cash-flow negative.
- The share count increased significantly as a result of the issuance of approximately 71.4 million shares through the ATM program; shares outstanding were 281.6 million at March 31, 2023 versus 209.7 million at December 31, 2022.
- Loss from discontinued operations declined to $0.3 million from $12.5 million as the sportsbook business had been terminated.
Guidance, outlook, commentary and risks
Management stated that existing cash and cash equivalents are expected to provide sufficient liquidity to continue as a going concern for at least one year from the financial statement issuance date. Based on its current outlook, the company had no plans for additional sales under the ATM program, although it acknowledged that additional capital may be required in the future. The filing does not provide a clear numerical revenue, subscriber or profitability forecast.
Management expects continued operating losses and negative operating cash flows. Results are seasonal, with higher revenue and subscriber additions generally occurring in the third and fourth quarters, particularly around major sports leagues. Key risks include subscriber acquisition and retention, intense streaming competition, rising content and sports-rights costs, advertising demand, dependence on Google Cloud Platform and Amazon Web Services, cybersecurity, international operations, privacy and tax regulation, and the need for future financing.
Fubo Gaming-related liabilities and contractual claims remain a material contingency. In May 2023, after the quarter end, Dynamo Stadium and Dynamo Soccer initiated arbitration alleging breaches by Fubo Gaming and guaranty obligations by fuboTV. The company cannot reasonably estimate any potential loss. The company also disclosed discussions regarding potential patent licensing fees and a vendor dispute for which potential expenditures could be material but cannot presently be estimated.
The consolidated securities class action was dismissed without prejudice on March 30, 2023. The company reported effective disclosure controls as of March 31, 2023 and no material changes in internal control over financial reporting during the quarter.
Investor verification points
- Verify whether subscriber growth and North America ARPU continue to offset declining or limited advertising growth.
- Assess whether the 1.0% gross margin can be sustained as sports-rights and affiliate distribution costs increase.
- Monitor operating cash burn, the remaining ATM capacity and the likelihood of additional dilutive or debt financing.
- Review the 2026 convertible notes, including potential cash settlement, maturity and fundamental-change obligations.
- Track Fubo Gaming-related arbitration, other guaranty claims and possible contract termination liabilities.
- Evaluate the company’s ability to manage its significant goodwill and intangible asset balances without future impairment charges.
- Review seasonal subscriber declines in the first and second quarters and the effect of major sporting events on annual results.