Fubotv Inc. 2023 Q3 Form 10-Q Summary
Business context and reporting period
Fubotv Inc. operates a live television streaming platform focused on sports, news and entertainment, with operations primarily in the United States and additional operations in Canada, Spain and France. The filing covers the unaudited quarter and nine months ended September 30, 2023, compared with the corresponding 2022 periods.
Fubo Gaming and Fubo Sportsbook were dissolved and ceased operations in October 2022. Their results are classified as discontinued operations; continuing operations consist of the streaming business.
Financial performance and key metrics
| Metric | Q3 2023 | Q3 2022 | 9M 2023 | 9M 2022 |
|---|---|---|---|---|
| Total revenue | $320.9 million | $225.0 million | $958.0 million | $689.4 million |
| Subscription revenue | $289.6 million | $201.9 million | $879.5 million | $621.0 million |
| Advertising revenue | $30.6 million | $22.7 million | $76.4 million | $67.9 million |
| Gross profit | $19.7 million | $(6.1) million | $46.4 million | $(43.7) million |
| Gross margin | 6.1% | (2.7)% | 4.8% | (6.3)% |
| Operating loss | $(83.3) million | $(103.6) million | $(217.3) million | $(318.0) million |
| Net loss from continuing operations | $(84.5) million | $(105.8) million | $(222.1) million | $(329.1) million |
| Net loss attributable to common shareholders | $(83.8) million | $(152.6) million | $(217.4) million | $(409.5) million |
| Basic and diluted loss per share | $(0.29) | $(0.82) | $(0.80) | $(2.32) |
- Revenue increased approximately 42.6% year over year in Q3 and 39.0% for the first nine months. Management attributed subscription growth to higher subscriber counts, package price increases and additional features.
- Q3 subscription revenue increased by $87.7 million, including $51.2 million from subscriber growth and $36.5 million from pricing and attachments. Nine-month subscription revenue increased by $258.5 million.
- Advertising revenue increased $7.9 million in Q3 and $8.5 million year to date. Q3 growth reflected more impressions sold, partly offset by lower CPMs; nine-month growth reflected higher CPMs, partly offset by fewer impressions.
- Paid subscribers at September 30, 2023 were approximately 1.5 million in North America and 0.4 million in the rest of the world, versus 1.2 million and 0.4 million, respectively, at September 30, 2022.
- North America monthly ARPU increased to $83.51 in Q3 from $71.51, while rest-of-world ARPU increased to $6.98 from $5.47.
- Subscriber-related expenses rose 33.4% in Q3 and 26.4% year to date, primarily from higher affiliate distribution rights and other distribution costs. Gross margin improved because revenue growth exceeded these costs.
- Sales and marketing expense increased to $60.5 million in Q3 and $137.3 million year to date. General and administrative expense declined to $46.0 million year to date from $65.7 million.
Cash flow, liquidity and capital structure
| Metric | September 30, 2023 | December 31, 2022 |
|---|---|---|
| Cash and cash equivalents | $259.9 million | $337.1 million |
| Cash, cash equivalents and restricted cash | $266.1 million | $343.2 million |
| Total assets | $1.220 billion | $1.278 billion |
| Total liabilities | $887.0 million | $874.4 million |
| Shareholders’ equity | $333.4 million | $401.7 million |
| Convertible notes, net | $396.0 million | $394.1 million |
- Net cash used in operating activities was $173.0 million for continuing operations and $175.6 million including discontinued operations, compared with $270.7 million and $295.8 million, respectively, in the prior-year period.
- Investing cash outflow was $16.1 million, primarily for $12.9 million of internally developed software, $2.9 million of intangible assets and $0.4 million of capital expenditures.
- Financing activities generated $114.5 million, primarily from $116.9 million of net proceeds under the at-the-market equity program.
- Cash, cash equivalents and restricted cash decreased by $77.2 million during the first nine months.
- The company reported a working-capital deficit of $49.5 million excluding discontinued operations and an accumulated deficit of approximately $1.8 billion. Management stated that existing cash is expected to support operations for at least twelve months from issuance of the financial statements.
- Outstanding indebtedness was approximately $410.3 million, including $402.5 million principal amount of 3.25% convertible notes due 2026 and approximately $7.8 million of other notes. A $6.1 million CAM Digital note, including accrued interest and penalties, was in default and subject to litigation.
- The company sold 81.7 million common shares under its ATM program during the first nine months, increasing shares outstanding to approximately 292.8 million at September 30, 2023. Approximately $156.3 million remained available under the ATM program.
Material changes versus the prior comparable period
- Revenue growth accelerated while gross profit turned positive and gross margin improved from negative margins in 2022.
- Operating loss narrowed by $20.3 million in Q3 and $100.7 million year to date, although the company remained substantially unprofitable.
- Net loss benefited materially from the absence of Fubo Sportsbook operating losses and impairment charges. Discontinued operations produced income of $0.7 million in Q3 and $4.7 million year to date, compared with losses of $46.9 million and $80.7 million in the prior-year periods.
- Operating cash burn improved by $97.7 million for continuing operations, but remained significant at $173.0 million year to date.
- Equity financing provided substantial liquidity but materially increased the common share count and diluted existing shareholders.
Guidance, outlook, commentary and risks
The filing does not provide a clear numerical revenue, profitability or subscriber outlook. Management expects continuing operating losses and states that additional capital may be required. It may use the ATM program or other financings to fund operations, repurchase or refinance debt, or strengthen liquidity; future financing may be unavailable or dilutive.
- Results are seasonal, with higher revenue and subscriber additions generally occurring in the third and fourth quarters, particularly around major sports seasons.
- Content and programming costs are the largest operating expense category. Multi-year content commitments and future renewals may pressure margins and liquidity.
- The company faces intense competition from streaming, cable and technology companies, and depends on subscriber retention, advertising demand, pricing and content availability.
- Material contingencies include a securities class action, a DISH patent-infringement action, and arbitration and potential additional claims related to the dissolution of Fubo Gaming. The company cannot estimate potential losses for these matters.
- The company is dependent on Google Cloud Platform and Amazon Web Services and previously experienced a criminal cyberattack that temporarily disrupted service in December 2022.
- Future obligations included approximately $44.4 million of operating lease liabilities, $30.3 million of annual sponsorship commitments and $85.0 million of sports-rights commitments.
- The company reported effective disclosure controls as of September 30, 2023 and no material changes to internal control over financial reporting during the quarter.
Investor verification checklist
- Verify the pace of subscriber growth, churn, North America and international ARPU, and whether pricing increases are sustainable.
- Monitor gross margin improvement against affiliate distribution, content and sports-rights cost increases.
- Assess the cash-burn trajectory and the timing and terms of any additional equity, debt or convertible financing.
- Review the February 2026 convertible-note maturity, potential cash settlement requirements and the defaulted CAM Digital note.
- Evaluate dilution from the ATM program, equity awards, convertible notes and remaining authorized or registered securities.
- Track the securities litigation, DISH patent case and Fubo Gaming-related arbitration for potential cash exposure or operating restrictions.
- Reconcile reported non-GAAP or operational metrics, if used in future updates, with GAAP revenue, losses and cash flow.