fuboTV Inc. — Q2 2022 Form 10-Q Summary
Business context and reporting period
fuboTV operates a live TV streaming platform focused on sports, news and entertainment, with subscription and advertising revenue primarily in the United States. It also operated Fubo Sportsbook in Iowa and Arizona and was pursuing additional market access, subject to regulatory approvals. The filing covers the quarter and six months ended June 30, 2022; financial statements are unaudited and presented under U.S. GAAP.
Key financial metrics
| Metric | Three months ended June 30 | Six months ended June 30 |
|---|---|---|
| Total revenue | $221.9 million, versus $130.9 million | $463.9 million, versus $250.6 million |
| Subscription revenue | $199.9 million, versus $114.4 million | $419.1 million, versus $221.5 million |
| Advertising revenue | $22.0 million, versus $16.5 million | $45.2 million, versus $29.1 million |
| Operating loss | $112.5 million, versus $81.1 million | $247.8 million, versus $146.1 million |
| Net loss attributable to common stockholders | $116.1 million, or $0.63 per share | $256.8 million, or $1.50 per share |
| Operating cash flow | Not separately provided for the quarter | $(217.8) million, versus $(87.4) million |
The filing does not present a conventional GAAP gross profit or gross margin. Subscriber-related expenses were $218.9 million in the quarter and $464.6 million for the six months, while broadcasting and transmission expenses were $17.2 million and $37.5 million, respectively. North America adjusted contribution margin declined to 0.7% for the six months from 6.8% in the prior-year period; quarterly adjusted contribution margin was 2.2% versus 8.2%.
North America paid subscribers were approximately 0.9 million at June 30, 2022, compared with 0.7 million at June 30, 2021. Six-month North America monthly ARPU was $71.38 versus $71.16, while ACPU increased to $70.91 from $66.32.
At June 30, 2022, cash, cash equivalents and restricted cash totaled $278.8 million, with an additional $100.0 million in short-term time deposits maturing in December 2022. Working capital was $126.7 million. The company had approximately $410.0 million of consolidated indebtedness, including $402.5 million principal amount of 3.25% convertible notes due 2026. Accumulated deficit was $1.3 billion.
Material changes versus the prior comparable period
- Revenue increased 69.5% in the quarter and 85.1% for the six months, primarily from subscriber growth, higher subscription package prices, increased advertising impressions and the December 2021 acquisition of Molotov.
- Operating losses increased as subscriber-related expenses, sales and marketing, technology and development, and general and administrative costs grew faster than revenue.
- Six-month operating cash burn increased by $130.4 million year over year, driven principally by the larger net loss and increases in prepaid and other assets.
- North America adjusted contribution margin contracted materially as ACPU increased faster than ARPU.
- The company recorded a $10.7 million non-cash goodwill impairment charge for the wagering segment, eliminating all wagering goodwill. The impairment was attributed to operating conditions, including temporary delays in launching new markets.
- Common shares outstanding increased from 154.0 million at December 31, 2021 to 185.3 million at June 30, 2022. The company raised approximately $220.2 million net through its at-the-market equity offering during the first six months.
- The company adopted ASU 2020-06 on January 1, 2022, reclassifying $75.3 million from equity-related accounting to convertible debt and reducing future non-cash debt-discount amortization.
Guidance, outlook, risks and unusual items
The filing does not provide a clear numerical revenue, subscriber or profitability guidance update. Management stated that existing cash, cash equivalents and short-term investments were expected to provide liquidity for at least the next twelve months, while also noting continuing operating losses, negative operating cash flow and potential future capital needs.
Management expects seasonal strength in the third and fourth quarters, particularly because of the National Football League, with subscriber declines typically occurring from the fourth quarter through the first and second quarters. The company is evaluating strategic opportunities for its wagering business and stated that it was seeking a long-term strategic partner for development, operation and expansion of Fubo Sportsbook.
- Major risks include continued losses, substantial cash burn, dependence on additional equity or debt financing, dilution, and the ability to service or refinance the 2026 convertible notes.
- Content commitments and sports rights obligations are substantial: future sports rights payments totaled $137.3 million, annual sponsorship commitments totaled $48.9 million, and operating lease liabilities totaled $43.2 million.
- A $5.4 million CAM Digital note, including accrued interest and penalties, was in default and subject to litigation.
- The company disclosed pending securities class-action litigation and other legal matters. It also reported that potential patent licensing fees and expenditures under a vendor arrangement could be material, although amounts could not be reasonably estimated.
- Sports wagering remains subject to extensive licensing, regulatory, market-access, payment-processing and risk-management requirements. Delays in new-market launches contributed to the wagering goodwill impairment.
- Other risks include competition, content licensing costs, seasonality, macroeconomic and inflationary pressures, cybersecurity, privacy and data regulation, reliance on Google Cloud Platform and AWS, and international operating risks.
Subsequent to quarter-end, the company agreed to issue Maximum Effort up to $30.0 million of common stock over three years and a warrant for up to 166,667 shares. It also established a new $350.0 million ATM program and filed a new shelf registration statement authorizing potential offerings of up to $750.0 million, subject to SEC effectiveness where applicable.
Important facts for investors to verify
- Whether subscriber growth and third- and fourth-quarter seasonality improve contribution margins despite rising content and acquisition costs.
- The pace of operating cash burn and the remaining liquidity after the December 2022 maturity of the $100.0 million time deposit.
- Future financing requirements, equity dilution and the company’s ability to repay, refinance or settle the 2026 convertible notes.
- Progress, economics and regulatory approvals for Fubo Sportsbook, including whether a strategic partner is secured.
- Potential additional goodwill or long-lived-asset impairments, particularly given the narrow 101.7% streaming reporting-unit fair value-to-carrying-value ratio.
- Exposure from the CAM Digital note default, securities litigation, patent licensing discussions and vendor-contract dispute.
- Execution against the $137.3 million sports-rights commitments and other contractual obligations.