Business Context and Reporting Period
fuboTV Inc. filed this unaudited Form 10-Q for the three and nine months ended September 30, 2022. The company operates a live television streaming platform focused on sports, news and entertainment, with subscription and advertising revenue primarily in North America and operations in Canada, Spain and France. Online sportsbook operations were conducted in Iowa, Arizona and New Jersey during the period but were discontinued on October 17, 2022 following the dissolution of Fubo Gaming.
Key Financial Metrics
| Metric | Three Months Ended September 30 | Nine Months Ended September 30 |
|---|---|---|
| Total revenue | $224.8 million, up 43.5% | $688.7 million, up 69.1% |
| Subscription revenue | $201.9 million, up 46.2% | $621.0 million, up 72.7% |
| Advertising revenue | $22.7 million, up 22.3% | $67.9 million, up 42.5% |
| Operating loss | $150.3 million | $398.1 million |
| Operating margin | (66.9%), compared with (65.9%) | (57.8%), compared with (61.2%) |
| Net loss | $152.7 million | $409.8 million |
| Net loss attributable to common stockholders | $152.6 million; $0.82 per share | $409.5 million; $2.32 per share |
| Cash flow from operating activities | Not separately disclosed for the quarter | $(294.5) million |
Subscriber-related expenses were $214.5 million in the third quarter and $679.0 million for the first nine months, representing approximately 95.4% and 98.6% of revenue, respectively. Total operating expenses were $375.1 million in the quarter and $1.09 billion year to date.
At September 30, 2022, cash and cash equivalents were $201.2 million, restricted cash was $6.1 million, and short-term investments were $100.0 million in time deposits maturing in December 2022. Working capital was $38.5 million. Total liabilities were $806.5 million, including $393.5 million of convertible notes, net of discount, and approximately $7.4 million of other debt principal. The 2026 Convertible Notes have a 3.25% coupon and mature in February 2026.
Cash, cash equivalents and restricted cash declined to $207.4 million from $379.4 million at December 31, 2021. Financing activities provided $233.2 million, primarily from $229.0 million of net at-the-market equity proceeds. Investing activities used $110.8 million, including the $100.0 million time deposit, while operating activities used $294.5 million.
Material Changes Versus the Prior Comparable Period
- Revenue increased by $68.1 million in the third quarter and $281.4 million for the first nine months, driven primarily by subscriber growth, higher attachments and pricing, increased advertising impressions, and the December 2021 acquisition of Molotov.
- Subscriber-related expenses increased by $71.1 million in the quarter and $301.9 million year to date, reflecting subscriber growth, higher affiliate distribution costs and increased affiliate rates.
- Sales and marketing expense increased 15.1% in the quarter and 43.5% year to date. Technology and development expense increased 31.9% in the quarter and 33.8% year to date.
- General and administrative expense decreased 19.4% in the quarter but increased 10.7% year to date.
- Net loss increased from $105.9 million to $152.7 million in the quarter and from $271.0 million to $409.8 million year to date. The increase included a $46.1 million impairment charge in 2022, compared with none in 2021.
- Paid subscribers reached approximately 1.2 million in North America and 0.4 million in the rest of the world at September 30, 2022, compared with approximately 0.9 million North American subscribers a year earlier. North America monthly ARPU increased to $71.52 from $70.19.
- The company issued 31.7 million common shares through its at-the-market programs during the first nine months, producing $229.0 million of net proceeds and increasing shares outstanding to 189.3 million from 154.0 million at December 31, 2021.
- The company adopted ASU 2020-06 effective January 1, 2022, increasing the carrying value of the 2026 Convertible Notes by $75.3 million and reducing additional paid-in capital by $87.9 million.
Outlook, Commentary, Risks and Unusual Items
- Management stated that existing cash, cash equivalents and short-term investments are expected to provide liquidity for at least one year from issuance of the financial statements, but the company has sustained operating losses and negative operating cash flow since inception and expects substantial future losses.
- Management expects cash outlays to decline following the termination of sportsbook operations, allowing additional funds to be allocated to streaming. However, the company may require additional capital, and future equity or convertible debt financings could dilute existing shareholders.
- The wagering business recorded a $35.5 million non-cash impairment charge in the third quarter, primarily related to prepaid market access agreements, intangible assets and property and equipment. Earlier in 2022, the company recorded a $10.7 million wagering goodwill impairment.
- Following the October 17, 2022 dissolution of Fubo Gaming, the company expects up to approximately $34.0 million of additional non-cash impairment charges in the fourth quarter, primarily related to market access agreements, plus potential cash termination, severance and other charges whose amount and timing were not estimable.
- The company has approximately $124.2 million of future sports-rights payments, $45.8 million of annual sponsorship commitments, $27.2 million of market-access commitments and $43.0 million of operating lease liabilities, based on the disclosed contractual schedules.
- Fubo Gaming commercial partners have alleged contract breaches following the dissolution. The company also disclosed unresolved patent licensing discussions and a vendor dispute for which potential payments could be material but cannot be reasonably estimated.
- The company remains exposed to content cost inflation, subscriber churn, seasonality, advertising-market weakness, competition, cloud-service dependence, cybersecurity and privacy requirements, international operations, regulatory matters and the risk of additional goodwill or long-lived-asset impairments.
- The filing does not provide a clear numerical revenue or profitability outlook for future periods. It cautions that actual results may differ materially from guidance or expectations.
Investor Verification Checklist
- Verify the pace of operating cash burn, the December 2022 maturity of the $100.0 million time deposit and liquidity after sportsbook-related wind-down costs.
- Assess the company’s ability to fund the $402.5 million principal amount of convertible notes at maturity or upon a required cash settlement or repurchase event.
- Confirm the size and timing of the additional fourth-quarter 2022 wagering impairments and contract termination charges.
- Monitor subscriber growth, churn, North America and international ARPU, and whether revenue growth is outpacing subscriber-related content and distribution costs.
- Review future sports-rights commitments and renewal pricing for potential pressure on gross margins and liquidity.
- Evaluate dilution from the remaining $340.8 million available under the 2022 at-the-market offering and other equity-linked awards.
- Follow claims from former Fubo Gaming partners, patent licensing discussions, the pending securities litigation and other contingencies.
- Confirm the planned transition to a single reportable segment and discontinued-operations presentation beginning in 2023.