Fubotv Inc. — Q1 2022 Form 10-Q Summary
Business context and reporting period
Fubotv Inc. operates a technology-driven live TV streaming platform focused on sports, news and entertainment, with subscription and advertising revenue primarily in the United States. The company also operates an online sportsbook launched in Iowa and Arizona and is pursuing additional market access, subject to regulatory approvals. The filing covers the three months ended March 31, 2022, compared with the three months ended March 31, 2021. Results are unaudited and presented under U.S. GAAP.
Financial performance and key metrics
| Metric | Q1 2022 | Q1 2021 | Change |
|---|---|---|---|
| Total revenue | $242.0 million | $119.7 million | 102.0% increase |
| Subscription revenue | $219.2 million | $107.1 million | 104.6% increase |
| Advertising revenue | $23.2 million | $12.6 million | 83.7% increase |
| Wagering revenue | $(0.3) million | — | New segment; negative revenue |
| Operating loss | $(135.2) million | $(65.1) million | Loss increased $70.2 million |
| Net loss | $(140.8) million | $(70.2) million | Loss increased $70.6 million |
| Net loss per share | $(0.89) | $(0.59) | More loss per share |
| Operating margin | (55.9)% | (54.4)% | Worsened approximately 1.5 points |
| Net margin | (58.2)% | (58.6)% | Improved approximately 0.4 points |
| North America paid subscribers | 1.1 million | 0.6 million | Approximately 89% increase |
| North America monthly ARPU | $71.03 | $69.88 | 1.6% increase |
| North America monthly ACPU | $71.57 | $66.24 | 8.0% increase |
| North America adjusted contribution margin | (0.8)% | 5.2% | Declined 6.0 points |
Operating expenses were $377.3 million, up from $184.8 million. Subscriber-related expenses increased to $245.7 million from $113.3 million, primarily due to higher affiliate distribution rights and other distribution costs. Sales and marketing increased to $46.2 million, including higher customer acquisition spending and stock-based compensation. Technology and development increased to $21.4 million, while general and administrative expense increased to $32.2 million, reflecting expansion, wagering operations, the Molotov acquisition and higher stock-based compensation.
Stock-based compensation was $19.4 million, compared with $9.4 million in the prior-year quarter. Depreciation and amortization was $11.5 million, compared with $9.2 million. Other expense was $6.0 million, including interest expense, debt discount amortization and changes in warrant fair value.
Cash flow, liquidity and capital structure
- Cash and cash equivalents were $450.9 million at March 31, 2022, compared with $374.3 million at December 31, 2021. Cash, cash equivalents and restricted cash totaled $456.0 million.
- Working capital was $193.0 million, and the accumulated deficit was $1.14 billion.
- Net cash used in operating activities was $126.7 million, compared with $53.9 million in Q1 2021. The increase primarily reflected the larger net loss and higher operating asset requirements.
- Net cash used in investing activities was $5.9 million, including approximately $4.0 million for gaming licenses and market access fees, $1.0 million for internal-use software and $0.9 million of capital expenditures.
- Net cash provided by financing activities was $209.2 million, primarily from $203.8 million of net proceeds from the at-the-market equity offering.
- Outstanding consolidated indebtedness was approximately $411.4 million, including $402.5 million of 3.25% convertible notes due 2026 and approximately $8.9 million of other notes and borrowings.
- The company states that existing cash is sufficient to continue as a going concern for at least one year from issuance of the financial statements, but expects continuing substantial losses and may require additional capital.
Material changes versus the prior comparable period
- Revenue more than doubled, driven by subscriber growth and increased advertising impressions, but operating expenses grew faster than revenue, resulting in a substantially larger operating and net loss.
- North America paid subscribers increased to 1.1 million from 0.6 million, while ARPU increased modestly and ACPU rose materially, causing adjusted contribution margin to turn negative.
- The wagering segment began contributing results, with negative revenue of $0.3 million and $10.0 million of adjusted operating expenses. No comparable wagering segment existed in Q1 2021.
- The company raised $203.8 million through sales of 27.4 million common shares under its at-the-market program, increasing shares outstanding and diluting existing holders.
- On January 1, 2022, the company adopted ASU 2020-06. The adoption increased the carrying value of the convertible notes by $75.3 million, reduced additional paid-in capital by $87.9 million and reduced accumulated deficit by $12.6 million, without affecting previously reported operating results, cash flows or loss per share.
- The December 2021 acquisition of Molotov contributed to higher depreciation and amortization, general and administrative expense and international operations. Purchase accounting remained subject to finalization.
Guidance, outlook, management commentary and risks
The filing does not provide a clear numerical revenue, profitability or cash-flow guidance range. Management expects continued investment in subscriber acquisition, technology, data capabilities, international expansion and wagering. It plans to launch the sportsbook in additional states during 2022 and beyond, subject to regulatory approvals.
- The business is seasonal: revenue and subscriber additions are typically higher in the third and fourth quarters, driven mainly by the NFL, while subscribers often decline in the first and second quarters.
- Management expects to continue incurring substantial operating losses and negative operating cash flow. Additional financing may be needed; future equity or convertible debt issuance could dilute existing shareholders.
- Content and distribution commitments are substantial and include multi-year sports rights, sponsorship and market-access agreements. Fixed or minimum content costs could pressure margins and liquidity if subscriber growth or retention underperforms.
- Sports wagering is subject to extensive and changing regulation, licensing requirements, market-access limitations, payment-processing constraints and event-level trading risk. Wagering revenue was negative in the quarter.
- The company faces intense competition in streaming and advertising, reliance on content providers and third-party distribution partners, and dependence on Google Cloud Platform and Amazon Web Services.
- COVID-19 impacts were considered manageable at the filing date, but disruptions to sports schedules, advertising demand, consumer spending or employees could adversely affect results.
- Pending matters include a consolidated securities class action alleging misleading disclosures regarding growth, profitability, seasonality, costs, advertising and sports wagering, as well as a separate contract-related lawsuit seeking at least $6.0 million. The company believes the claims are without merit; potential patent licensing fees and certain vendor obligations could be material but cannot be estimated.
- Management concluded that disclosure controls and procedures were effective at the reasonable assurance level as of March 31, 2022, with no reported material changes in internal control over financial reporting during the quarter.
Important facts for investors to verify
- Whether subscriber growth can continue while reducing ACPU and restoring positive contribution margins.
- The pace at which operating cash burn declines relative to the $450.9 million cash balance and contractual commitments.
- Future financing needs, dilution from additional equity issuance and the repayment, conversion or refinancing requirements of the 2026 convertible notes.
- The economics, regulatory approvals and market-access costs of expanding Fubo Sportsbook, given negative Q1 wagering revenue.
- The final purchase accounting for Molotov and the recoverability of approximately $627.6 million of goodwill and $207.8 million of intangible assets.
- The financial exposure from content commitments, pending litigation, potential patent licensing and unresolved vendor obligations.
- Whether the company’s stated outlook is consistent with actual results, because the filing expressly cautions that actual results may differ materially from guidance and forward-looking statements.