Fubotv Inc. 10-Q Summary
Business context and reporting period
Unaudited quarterly report for the three and nine months ended September 30, 2021. fuboTV operates a live television streaming platform focused on sports, news and entertainment, with revenue primarily from subscriptions and advertising. The company is also expanding into online sports wagering and launched its Iowa sportsbook in November 2021, after the reporting period.
Comparability with 2020 is affected by the April 2020 acquisition of fuboTV Pre-Merger, the July 2020 disposition of Facebank AG and Nexway, and the February 2021 acquisition of Vigtory, Inc.
Key financial metrics
| Metric | Q3 2021 | Q3 2020 | 9M 2021 | 9M 2020 |
|---|---|---|---|---|
| Total revenue | $156.7 million | $61.2 million | $407.3 million | $112.7 million |
| Subscription revenue | $138.1 million | $53.4 million | $359.6 million | $92.9 million |
| Advertising revenue | $18.6 million | $7.5 million | $47.6 million | $11.8 million |
| Operating loss | $(103.3) million | $(302.2) million | $(249.4) million | $(387.6) million |
| Net loss | $(105.9) million | $(274.1) million | $(271.0) million | $(404.1) million |
| Net loss per share | $(0.74) | $(6.20) | $(2.02) | $(11.00) |
| Net cash used in operating activities | Not provided for quarter | Not provided for quarter | $(143.0) million | $(72.5) million |
Q3 operating margin was approximately negative 65.9% and net margin was approximately negative 67.5%. Nine-month operating margin was approximately negative 61.2% and net margin was approximately negative 66.5%. The filing does not provide a GAAP gross margin.
- Average paid subscribers used in the company’s non-GAAP metrics were 751,679 in Q3 2021 versus 333,549 in Q3 2020.
- Monthly ARPU increased to $74.54 from $67.70, while monthly ACPU increased to $65.31 from $56.78.
- Non-GAAP adjusted contribution margin declined to 12.4% from 16.1% in Q3 and was 9.0% for the nine months versus 9.1% in the comparable 2020 pro forma period.
- Cash and cash equivalents were $393.1 million at September 30, 2021; total cash, cash equivalents and restricted cash were $398.5 million. Working capital was $181.6 million.
- Total assets were $1.16 billion and stockholders’ equity was $587.3 million at September 30, 2021. Accumulated deficit was $897.3 million.
- Carrying value of convertible notes was $312.1 million, and total notes payable and long-term borrowings were $317.1 million. The filing separately describes approximately $407.5 million of consolidated principal indebtedness, including the $402.5 million principal amount of the 2026 Convertible Notes.
Material changes versus the prior comparable period
- Q3 revenue increased $95.5 million, or approximately 156%, driven by subscriber growth, higher subscription package prices and greater advertising impressions.
- Q3 operating loss improved by $198.9 million primarily because the 2020 period included a $236.7 million impairment charge for intangible assets and goodwill. No comparable impairment was recorded in 2021.
- Despite revenue growth, subscriber-related expenses increased to $143.4 million from $61.2 million, and total operating expenses excluding impairment increased to $259.9 million from $126.7 million.
- Nine-month operating cash burn increased to $143.0 million from $72.5 million, while investing cash use increased to $35.7 million from $1.3 million, primarily due to $29.7 million of gaming licenses and market access fees.
- Financing cash inflows increased to $441.0 million, primarily from $389.4 million of net convertible-note proceeds and approximately $70.0 million of net proceeds from an at-the-market equity offering.
- The company repaid its senior secured loan in full on May 7, 2021 and repaid the $4.7 million PPP loan on February 26, 2021.
- Series AA preferred stock was fully converted or exchanged for common stock during the first quarter of 2021. Common shares issued increased to 144.7 million at September 30, 2021 from 92.5 million at December 31, 2020.
Guidance, outlook, risks and unusual items
- Management stated that existing cash is expected to provide liquidity to continue as a going concern for at least twelve months from the financial statement issuance date, but the company expects continued substantial operating losses and negative operating cash flow.
- No specific quantitative revenue, subscriber or profitability guidance is provided in the filing text. Management cautions that actual results may differ materially from any guidance.
- The company expects to expand sports wagering into additional states during the fourth quarter of 2021 and 2022. Market access, licensing, regulatory approvals, payment processing, betting risk management and competition create significant execution risks.
- The CAM Digital Note, with an outstanding balance including interest and penalties of approximately $4.9 million, was in default as of September 30, 2021; the company was negotiating with the holders.
- The company identified material weaknesses in internal control over financial reporting relating to non-routine transactions and concluded that its disclosure controls and procedures were not effective as of September 30, 2021. Remediation efforts were ongoing.
- The company faces a consolidated securities class action alleging misleading statements concerning financial health, subscriber growth, profitability, advertising, cost escalation and sports wagering. The company believes the claims are without merit and is defending the litigation. A separate derivative action was dismissed with prejudice in July 2021, while another lawsuit seeking at least $6 million remained pending.
- Content commitments and minimum guarantees may pressure margins and liquidity if subscriber growth or retention falls short. The company disclosed that it had failed to make minimum guarantee payments to certain key programmers.
- COVID-19, sports-event disruptions, seasonality, competition, dependence on cloud providers and content licensors, privacy and cybersecurity obligations, and potential future equity or debt issuance remain material risks.
- Subsequent to quarter-end, the company agreed to acquire Edisn Inc. for $20 million and Molotov SAS for approximately $190 million, with the latter expected to be at least 85% common-stock consideration. These transactions were not reflected in the September 30, 2021 balance sheet.
Facts investors should verify
- Whether subscriber growth and pricing increases can outpace content, distribution, marketing and wagering-related costs.
- The pace at which adjusted contribution margin improves, given the Q3 decline to 12.4% and continued large GAAP losses.
- Cash burn, financing needs and potential dilution from the $750 million shelf registration, the $500 million ATM program and conversion of the 2026 Convertible Notes.
- Resolution of the CAM Digital Note default and any consequences under related debt agreements.
- Progress in remediating material weaknesses in internal controls and the impact of prior accounting errors and restatements.
- Regulatory approvals, market access costs and operating losses associated with expansion into sports wagering.
- Potential exposure from securities litigation, content payment disputes, tax matters and the announced Edisn and Molotov acquisitions.