Fubotv Inc. — Fiscal 2022 Form 10-K Summary
Business Context and Reporting Period
FuboTV operates a sports-first live television streaming platform offering sports, news and entertainment content through connected TVs, mobile devices, tablets and computers. The filing covers the fiscal year ended December 31, 2022; the source provides annual results rather than a separate Q4 income statement.
Fubo reported approximately 1.445 million paid subscribers in the United States and Canada and approximately 420,000 in Spain and France at year-end 2022, compared with approximately 1.122 million and 193,000, respectively, at year-end 2021. The company operates one continuing reportable segment, streaming.
Financial Results and Key Metrics
| Metric | 2022 | 2021 | Change |
|---|---|---|---|
| Total revenue | $1,008.7 million | $638.4 million | +$370.3 million |
| Subscription revenue | $905.9 million | $564.4 million | +$341.4 million |
| Advertising revenue | $101.7 million | $73.7 million | +$28.0 million |
| Operating loss | $(411.9) million | $(328.3) million | Loss widened |
| Net loss from continuing operations | $(425.0) million | $(351.8) million | Loss widened |
| Net loss | $(561.9) million | $(383.0) million | Loss widened |
| Basic and diluted loss per share | $(3.08) | $(2.78) | Loss per share increased |
| Gross profit | $(41.1) million | $(10.4) million | Declined |
| Gross margin | (4.1)% | (1.6)% | Down 2.5 percentage points |
| Net cash used in operating activities | $(289.8) million | $(171.9) million | Cash burn increased |
Subscriber-related expenses increased to $976.4 million from $593.2 million, exceeding subscription revenue growth and contributing to negative gross profit. Total operating expenses were $1.421 billion, compared with $966.6 million in 2021. Stock-based compensation was $52.5 million.
North America monthly ARPU increased to $72.74 from $70.50. Rest-of-world ARPU was $6.14 for 2022; a comparable 2021 figure was not presented. Revenue outside the United States and Canada remained relatively small, with total rest-of-world revenue of $36.5 million.
Cash, cash equivalents and restricted cash totaled $343.2 million at December 31, 2022, including $337.1 million of cash and cash equivalents and $6.1 million of restricted cash. Working capital excluding discontinued operations was $26.1 million. Total liabilities were $874.4 million and total shareholders’ equity was $401.7 million.
Debt, Liquidity and Cash Flow
- Outstanding consolidated indebtedness was approximately $410.2 million, including $402.5 million principal amount of 3.25% convertible notes due February 2026 and other notes and borrowings.
- The convertible notes had a net carrying value of $394.1 million at year-end and an estimated fair value of $183.1 million. The notes may require cash or equity settlement upon conversion, repurchase or maturity, subject to the indenture terms.
- Fubo raised approximately $292.1 million net through at-the-market equity offerings during 2022, issuing 50.6 million shares at a weighted-average gross sales price of $5.90 per share. The share count increased to 209.7 million from 154.0 million at year-end 2021.
- Continuing-operations investing cash outflow was $6.0 million, primarily for $1.1 million of capital expenditures and $4.9 million of capitalized internal-use software.
- Total operating and investing cash use, including discontinued operations, was approximately $329.1 million. Financing activities provided $296.3 million, resulting in a $32.9 million decrease in cash, cash equivalents and restricted cash.
- Management stated that existing liquidity is expected to support operations for at least twelve months from the financial statement issuance date, but also disclosed that additional capital may be required.
Material Changes and Unusual Items
- Fubo dissolved Fubo Gaming and ceased operating Fubo Sportsbook on October 17, 2022. Wagering results were classified as discontinued operations for all periods presented.
- Discontinued operations generated a 2022 net loss of $136.9 million, including approximately $87.4 million of impairment charges. The discontinued operation also had $32.6 million of current liabilities at year-end, including approximately $24.7 million related primarily to contract termination costs.
- Continuing-operations gross margin deteriorated as content and distribution costs increased faster than revenue.
- The company recorded no streaming goodwill impairment at December 31, 2022, but the estimated fair value of the streaming reporting unit exceeded carrying value by only 3.5%. The valuation used a 31% discount rate and revenue multiples of 0.34x to 0.52x, making the conclusion sensitive to assumptions.
- Fubo adopted ASU 2020-06 for convertible debt accounting on January 1, 2022. This increased the reported convertible-note liability by $75.3 million and reduced additional paid-in capital by $87.9 million on adoption, without affecting previously reported earnings or cash flows.
- The December 14, 2022 cyberattack temporarily disrupted service. Fubo stated that service was restored the same evening and that the incident had been reported to law enforcement.
- Fubo initiated integration of the Fubo and Molotov platforms into a Unified Platform, with a planned United States launch in 2023 and expected future cost savings, although no quantified savings guidance was provided.
Outlook, Commentary and Risks
Management continues to target subscriber growth, higher ARPU, advertising monetization, content optimization and eventual sustainable profitability. The filing does not provide a clear numerical 2023 revenue, subscriber, margin or profitability outlook in the supplied text.
- Fubo expects continued operating losses and negative operating cash flow and may need additional debt or equity financing. Future equity financing could materially dilute existing shareholders.
- Content commitments, affiliate distribution fees and sports-rights obligations are substantial. Future payments under disclosed sports-rights agreements total $112.7 million, and sponsorship obligations total $32.6 million.
- Competition from YouTube TV, Hulu Live, Sling TV, traditional pay-TV operators and major technology and entertainment companies may pressure subscriber growth, pricing, advertising revenue and margins.
- Revenue and subscriber additions are seasonal, generally stronger in the third and fourth quarters because of sports programming. Subscriber counts typically decline in the first and second quarters.
- Fubo remains exposed to content-renewal risk, rising programming costs, advertising-market weakness, macroeconomic conditions, cybersecurity incidents, cloud-provider concentration, privacy regulation and international operating risks.
- The company disclosed pending securities class-action litigation and potential claims from former Fubo Gaming commercial partners. It also identified unresolved patent-licensing discussions and a vendor dispute for which potential costs could be material but were not reasonably estimable.
- The filing states that internal control over financial reporting was effective as of December 31, 2022, and KPMG issued unqualified opinions on the financial statements and internal controls.
Investor Verification Checklist
- Verify the company’s liquidity runway against continuing quarterly operating cash burn, debt maturities and any required payments under the 2026 convertible notes.
- Assess whether subscriber growth and North America ARPU can offset content-cost inflation and restore positive gross margin.
- Review the sustainability and dilution impact of the 2022 ATM equity issuance and remaining availability under the ATM program.
- Examine the liabilities, contract terminations and possible guarantees associated with the dissolved Fubo Gaming business.
- Evaluate the sensitivity of the $618.5 million streaming goodwill balance to subscriber growth, revenue growth, content costs, discount rates and market multiples.
- Review pending litigation, patent discussions, vendor disputes and any developments following the December 2022 cyberattack.