Business Context and Reporting Period
fuboTV Inc. filed this unaudited Form 10-Q for the quarter and six months ended June 30, 2020. The April 1, 2020 merger with fuboTV Pre-Merger substantially transformed the business into a live television streaming platform focused on sports, news and entertainment. The company’s prior-year results are not directly comparable because the 2020 periods include the acquired fuboTV operations and the effects of the FaceBank AG/Nexway transactions.
Key Financial Metrics
| Metric | Three Months Ended June 30, 2020 | Six Months Ended June 30, 2020 |
|---|---|---|
| Revenue | $44.2 million | $51.5 million |
| Subscription revenue | $39.5 million | $39.5 million |
| Advertising revenue | $4.3 million | $4.3 million |
| Operating loss | $67.3 million | $85.4 million |
| Net loss | $99.8 million | $156.1 million |
| Net loss attributable to common stockholders | $99.1 million | $154.7 million |
| Basic and diluted loss per share | $2.82 | $4.77 |
| Net cash used in operating activities | Not separately provided | $42.3 million |
Revenue was entirely generated by the acquired fuboTV business in the second quarter, with no comparable prior-year revenue reported in the consolidated statements. Six-month revenue also included $7.3 million of Nexway software-license revenue. Operating margin was approximately negative 152% for the quarter and negative 166% for the six-month period; net margin was approximately negative 226% and negative 303%, respectively.
Operating expenses for the quarter were $111.5 million, including $53.1 million of subscriber-related expenses, $9.5 million of broadcasting and transmission costs, $7.6 million of sales and marketing, $9.6 million of technology and development, $17.3 million of general and administrative expense, and $14.4 million of depreciation and amortization.
At June 30, 2020, cash and cash equivalents were $7.4 million and restricted cash was $1.3 million. The company reported a working-capital deficiency of $258.3 million and an accumulated deficit of $210.5 million. Total assets were $1.11 billion, including $711.0 million of goodwill and $340.8 million of net intangible assets. Total liabilities were $422.3 million.
Cash used in operating activities increased to $42.3 million from $1.5 million in the prior-year six-month period. Financing activities provided $44.1 million, primarily from common-stock issuances and borrowings, while investing activities used $0.7 million. Cash, cash equivalents and restricted cash increased by $1.1 million during the first six months.
Material Changes Versus the Prior Comparable Period
- Revenue increased from zero in the consolidated prior-year periods to $44.2 million in the second quarter and $51.5 million year to date, primarily because of the April 1 merger.
- Operating expenses increased from $6.0 million to $111.5 million in the quarter and from $12.2 million to $136.9 million for the six-month period.
- Net loss increased from $3.4 million to $99.8 million for the quarter and from $6.2 million to $156.1 million for the six-month period.
- Other expense was $35.9 million in the quarter and $75.2 million year to date, compared with prior-year other income of $1.6 million and $3.7 million. Major 2020 items included financing costs, losses on issuing notes, bonds and warrants, and the $11.9 million Nexway deconsolidation loss.
- The balance sheet expanded materially following the merger, with goodwill increasing to $711.0 million from $227.8 million and net intangible assets increasing to $340.8 million from $116.6 million.
- Nexway was deconsolidated on March 31, 2020 after the company’s voting interest fell below control. At June 30, 2020, the company held a 31.2% voting interest and classified related assets and liabilities as held for sale.
Debt, Liquidity, Outlook and Risks
Management stated that the company expects continued losses and will need additional capital. The filing identifies substantial doubt about the company’s ability to continue as a going concern within one year of issuance. Management was seeking additional debt and equity financing, with no assurance that financing would be available on acceptable terms.
Debt and financing obligations included the AMC senior secured term loan, with $22.5 million outstanding at June 30, 2020; convertible notes with $2.8 million of principal and a $4.4 million carrying amount; a $4.7 million Paycheck Protection Program loan; a $9.1 million carrying amount under the Fundigo revenue participation arrangement; and other borrowings. The company also had $40.6 million of warrant liabilities and significant related-party and affiliate payables. The $100 million revolving credit facility had no borrowings at June 30 and was terminated on July 8, 2020.
The Senior Notes issued to FB Loan carried a stated interest rate of 17.39% and were secured by substantially all relevant borrower assets. The company paid $7.5 million on May 28, 2020 and the remaining $2.6 million balance plus accrued interest on July 3, 2020. The Fundigo arrangement was repaid on July 6, 2020.
Subsequent events included a $20.0 million common-stock financing on July 2, 2020, the sale of FaceBank AG on July 10, 2020, an expected gain of approximately $8.3 million from that sale, and a $10.0 million term loan issued on July 16, 2020 at 13% interest, maturing in 2023.
Management indicated that COVID-19 had not yet resulted in an expected material long-term impact on development timelines or liquidity, but warned that cancellations or interruptions of professional and college sports could reduce content appeal, subscriber acquisition and retention, advertising demand and liquidity. Other principal risks include intense competition, fixed and minimum-guaranteed content obligations, breaches or arrears under content agreements, dependence on subscriber growth, AWS and other technology providers, cybersecurity and privacy regulation, international operations, litigation, tax compliance, and the need to integrate the merger.
The company disclosed material weaknesses in internal control over financial reporting and concluded that its disclosure controls and procedures were not effective as of June 30, 2020. Remediation efforts were underway, but required validation over multiple reporting cycles.
Important Facts for Investors to Verify
- Whether the company can raise sufficient capital to address the disclosed going-concern uncertainty and fund continued operating cash burn.
- The current status, terms and covenant compliance of the AMC term loan, convertible notes, PPP loan, Access Road loan and other post-quarter-end financing.
- The final accounting for the merger, including the provisional $562.9 million goodwill addition, $243.6 million of acquired intangible assets and related deferred tax liabilities.
- Whether subscriber growth, advertising monetization and content costs can produce improving contribution margins; the filing does not provide a clear subscriber count or subscriber acquisition-cost metric in the supplied text.
- The status of overdue or disputed affiliate and content-provider obligations, including the reported $61.9 million of accrued affiliate fees and disclosed breaches or minimum-guarantee payment issues.
- Progress in remediating material control weaknesses and the implications of the company’s prior financial-statement restatements.
- The resolution of disclosed litigation, including the New York claim seeking at least $6.0 million and the Meide-related proceeding.
- Potential dilution from Series AA preferred stock, convertible notes, options and approximately 7.5 million outstanding warrants at June 30, 2020.