fuboTV Inc. Form 10-Q Summary
Business context and reporting period
Quarterly report for the three months ended March 31, 2021. fuboTV operates a live television streaming platform focused on sports, news and entertainment, with revenue primarily from subscriptions and advertising. The company is expanding into sports wagering through its February 2021 acquisition of Vigtory, Inc., renamed Fubo Gaming Inc.
Comparisons with March 31, 2020 are not directly meaningful because the 2020 period excluded fuboTV Pre-Merger operations and included businesses later disposed of, including Nexway. The 2020 comparative financial statements were also restated for goodwill accounting errors.
Key financial metrics
| Metric | Three months ended March 31, 2021 | Three months ended March 31, 2020 |
|---|---|---|
| Total revenue | $119.7 million | $7.3 million |
| Subscription revenue | $107.1 million | $0 |
| Advertising revenue | $12.6 million | $0 |
| Operating loss | $(65.1) million | $(18.1) million |
| Net loss | $(70.2) million | $(56.3) million |
| Net loss attributable to common stockholders | $(70.1) million | $(55.6) million |
| Basic and diluted loss per share | $(0.59) | $(1.83) |
| Net cash used in operating activities | $(53.9) million | $(7.5) million |
| Net cash used in investing activities | $(2.4) million | $(2.4) million |
| Net cash provided by financing activities | $385.0 million | $2.4 million |
Operating expenses were $184.8 million, including $113.3 million of subscriber-related expenses, $22.1 million of sales and marketing, $11.4 million of technology and development, $18.2 million of general and administrative expense, and $9.2 million of depreciation and amortization. Calculated operating margin was approximately negative 54.4% and net margin was approximately negative 58.6%.
Non-GAAP monthly ARPU was $69.09 versus $54.16 on a pro forma basis, while non-GAAP monthly ACPU was $65.47 versus $52.56. Adjusted contribution margin was 5.3% versus 3.0%. Average subscribers were 590,961 versus 302,788 on the comparable pro forma basis.
Cash and cash equivalents were $459.5 million at March 31, 2021, with total cash, cash equivalents and restricted cash of $464.9 million. Working capital was $278.9 million. Total assets were $1.19 billion and total stockholders’ equity was $675.3 million.
Debt included $304.3 million of convertible notes net of discount, $17.7 million of short-term borrowings, $4.7 million of notes payable and other borrowings. The company reported approximately $425.3 million of consolidated indebtedness based on principal amounts and accrued obligations. The $4.7 million CAM Digital Note was in default and subject to negotiations.
Material changes versus the prior comparable period
- Revenue shifted from $7.3 million of primarily Nexway software-license revenue in the prior-year reported period to $119.7 million of fuboTV subscription and advertising revenue.
- Operating costs increased substantially because the current period included the fuboTV streaming business, including content, distribution, marketing and technology costs.
- Net loss increased by $13.8 million, although other expense declined by $33.7 million because the prior-year period included a $24.1 million loss on issuance of notes, bonds and warrants and an $11.9 million Nexway deconsolidation loss.
- Operating cash burn increased to $53.9 million from $7.5 million, reflecting the larger operating platform and continuing losses.
- Financing cash inflow increased primarily because of the February 2021 issuance of $402.5 million of 3.25% convertible senior notes, generating approximately $389.9 million of net proceeds.
- Series AA convertible preferred stock was fully converted or exchanged for common stock during January through March 2021. Common shares issued increased to approximately 140.5 million from 92.5 million at December 31, 2020.
- The company acquired Vigtory on February 26, 2021 for purchase consideration of approximately $10.3 million, with substantially all allocated to goodwill. The acquisition also involved $26.9 million of common shares issued to former employee shareholders subject to future service vesting.
Outlook, commentary, risks and unusual items
Management stated that cash and cash equivalents are expected to provide liquidity to continue as a going concern for at least twelve months from the financial statement issuance date. The company nevertheless expects substantial continuing losses and negative operating cash flows while it scales the streaming platform and develops wagering operations.
No specific current-period numerical revenue or profitability guidance is clearly provided in the filing text. Management emphasizes a strategy of growing paid subscribers, improving engagement and retention, increasing monetization, and integrating streaming with gaming and sports wagering.
- Sports-related seasonality is significant, with higher revenue and subscriber additions generally expected in the third and fourth quarters.
- The Vigtory acquisition introduces regulatory, licensing, market-access, payment-processing, odds-management and event-risk exposure in the sports betting industry.
- Content commitments may include multi-year minimum guarantees. The company disclosed that it had failed to make certain minimum guarantee payments and may be unable to make similar payments in the future, potentially affecting content access.
- The company remains exposed to intense competition, subscriber churn, advertising demand, content-cost inflation, reliance on cloud providers and cybersecurity or service interruptions.
- COVID-19 could affect live sports availability, advertising markets, subscriber demand, employee productivity and access to capital, although management did not currently expect a material impact on operations.
- Disclosure controls and procedures were not effective as of March 31, 2021 because material weaknesses remained in internal control over financial reporting, particularly for non-routine transactions and business combinations. Remediation was ongoing.
- The company entered into a 12-year New York headquarters lease beginning October 1, 2021, with annual fixed rent of approximately $4.1 million for the first four years.
- Material litigation includes consolidated securities class actions, a derivative action and a separate lawsuit seeking at least $6.0 million. Management believes the claims are without merit, but outcomes are uncertain.
- After quarter-end, on May 7, 2021, the company repaid the AMC Networks senior secured term loan in full.
Most important facts for investors to verify
- Whether subscriber growth, retention, ARPU and advertising monetization can outpace content, distribution, marketing and technology costs.
- The sustainability of the company’s $459.5 million cash balance given quarterly operating cash burn of $53.9 million and expected continuing losses.
- The terms, conversion dilution, cash-settlement requirements and maturity risks associated with the $402.5 million 2026 convertible notes.
- The status and resolution of the $4.7 million CAM Digital Note default and any remaining secured or other debt following the May 7, 2021 term-loan repayment.
- Progress in remediating material weaknesses in internal control and the effect of the prior goodwill restatement on reported results.
- Actual licensing, market access and regulatory progress for the sports wagering strategy, including the financial impact of the Vigtory acquisition.
- Potential exposure from securities litigation, derivative litigation, content minimum guarantees, tax filings and other contingencies.
- Whether the reported non-GAAP subscriber, ARPU, ACPU and contribution-margin measures reconcile consistently with GAAP results and remain comparable across periods.