Fubotv Inc. — Form 10-Q Summary
Business Context and Reporting Period
fuboTV operates a technology-driven live television streaming platform focused on sports, news and entertainment, with revenue primarily from subscriptions and advertising. The unaudited report covers the three and six months ended June 30, 2021, compared with the corresponding 2020 periods. Comparability is limited because the 2020 periods include only three months of fuboTV operations following the April 1, 2020 merger and also include businesses later disposed of in July 2020.
Financial Performance and Position
| Metric | Three Months Ended June 30 | Six Months Ended June 30 |
|---|---|---|
| Total revenue | $130.9 million, versus $44.2 million | $250.6 million, versus $51.5 million |
| Subscription revenue | $114.4 million, versus $39.5 million | $221.5 million, versus $39.5 million |
| Advertising revenue | $16.5 million, versus $4.3 million | $29.1 million, versus $4.3 million |
| Operating loss | $81.1 million, versus $67.3 million | $146.1 million, versus $85.4 million |
| Net loss | $94.9 million, versus $73.6 million | $165.1 million, versus $129.9 million |
| Net loss per share | $0.68, versus $2.08 | $1.27, versus $3.97 |
| Operating margin | Approximately negative 61.9% | Approximately negative 58.3% |
| Net margin | Approximately negative 72.5% | Approximately negative 65.9% |
Operating expenses were $212.0 million in the second quarter and $396.8 million for the six-month period. Subscriber-related expenses were $120.5 million and $233.8 million, respectively, and continued to exceed subscription revenue. Stock-based compensation was $33.8 million for the six months, including a $7.9 million incremental charge related to accelerated option vesting for two former employees.
Average paid subscribers were 630,624 in the second quarter and 610,793 for the six-month period, compared with 268,298 and 285,543 on the pro forma 2020 basis. Monthly ARPU was $71.43 in the second quarter and $70.30 for the six months; monthly ACPU was $65.53 and $65.50, producing adjusted contribution margins of 8.3% and 6.8%, respectively.
Net cash used in operating activities was $87.4 million for the six months, compared with $42.3 million in 2020. Investing cash use was $5.2 million, while financing activities provided $368.5 million, principally from the convertible-note offering. Cash, cash equivalents and restricted cash increased to $412.1 million from $136.2 million at December 31, 2020.
At June 30, 2021, cash and cash equivalents were $406.7 million, working capital was approximately $218.2 million, total assets were $1.14 billion and stockholders’ equity was $606.4 million. Accumulated deficit was $791.5 million.
The balance sheet reported $312.8 million of notes and borrowings, including $308.0 million carrying value of the 2026 Convertible Notes and $4.8 million of other notes payable. The filing separately describes approximately $407.3 million of principal indebtedness, including $402.5 million of convertible notes. The 2026 Convertible Notes bear 3.25% interest, mature February 2026 and had an initial conversion price of $57.78 per share.
Material Changes Versus the Prior Comparable Period
- Second-quarter revenue increased approximately 196%, driven by subscription and advertising growth. Six-month revenue increased approximately 387%, although the comparison is distorted by the merger and the absence of a full prior-year fuboTV period.
- Operating losses increased in absolute dollars as subscriber-related costs, sales and marketing, technology spending and general and administrative expenses expanded faster than revenue.
- Net loss per share improved because the weighted-average share count increased materially following preferred-stock conversions and equity issuance, despite a larger absolute net loss.
- Cash and liquidity increased substantially following the February 2021 issuance of $402.5 million of convertible notes, netting approximately $389.4 million of proceeds.
- The company repaid its senior secured term loan in full on May 7, 2021 and repaid its $4.7 million Paycheck Protection Program loan on February 26, 2021.
- All outstanding Series AA preferred stock was converted or exchanged into common stock during the first quarter, eliminating the preferred-stock balance.
- On February 26, 2021, the company acquired Vigtory, a sports betting and interactive gaming company, for purchase consideration of approximately $10.3 million. The acquisition added $10.7 million of goodwill and supported the company’s wagering strategy.
Outlook, Risks, Contingencies and Unusual Items
Management stated that existing cash is expected to provide liquidity for at least the next twelve months, while also noting continuing operating losses and negative operating cash flow since inception. The filing does not provide a clear numerical revenue or earnings outlook in the supplied text. Management expects continued investment in subscriber growth, technology, marketing, business development and sports wagering.
- The company remains unprofitable and expects substantial future losses. Content and programming commitments are often fixed or subject to minimum guarantees; the company disclosed that it has failed to make certain minimum guarantee payments and may be unable to make similar payments in the future.
- Sports wagering expansion depends on state market access, licenses and regulatory approvals. The strategy introduces risks involving regulation, payment processing, sports data, odds accuracy, risk management and potentially significant event-level losses.
- COVID-19, including possible effects on live sports, advertising demand, subscriber payment behavior and operations, remains a disclosed uncertainty. Management did not currently expect a material impact but continued to monitor developments.
- Disclosure controls and procedures were deemed ineffective as of June 30, 2021 because material weaknesses remained in internal control over financial reporting, particularly for non-routine transactions and business combinations. Remediation efforts were ongoing.
- The company disclosed a consolidated securities class action alleging misleading statements concerning financial condition, subscriber growth, profitability, advertising, cost escalation and sports wagering. An amended complaint was filed July 12, 2021; the company considers the claims meritless and intends to defend them.
- A shareholder derivative action was dismissed with prejudice on July 28, 2021. Separate litigation seeking at least $6.0 million in damages remained pending, with the company’s motion to dismiss unresolved.
- The company entered into a new 12-year New York headquarters lease commencing October 1, 2021, with annual fixed rent of approximately $4.1 million for the first four years.
- Goodwill totaled $489.1 million and intangible assets totaled $199.6 million at quarter-end, creating exposure to future impairment charges. The filing notes a prior $148.1 million goodwill impairment for the FaceBank reporting unit.
Most Important Facts for Investors to Verify
- Whether subscriber growth, retention and advertising monetization continue to outpace content, marketing, technology and wagering-related costs.
- The company’s cash-burn rate, expected runway and need for additional equity or debt financing.
- The reconciliation between the $312.8 million carrying value of borrowings and approximately $407.3 million of stated principal indebtedness.
- Progress in remediating material weaknesses in internal controls and the risk of further restatements or reporting deficiencies.
- State-by-state licensing, market-access arrangements and launch economics for the sports wagering business.
- Compliance with minimum content guarantees and the potential effect of unpaid obligations on content availability and liquidity.
- The status and potential exposure of the securities class action and other litigation.
- The sustainability of the reported non-GAAP adjusted contribution margin, including the effects of deferred revenue, minimum guarantees and content credits.