Fubotv Inc. 2023 Form 10-K Summary
Business context and reporting period
FuboTV is a sports-first live television streaming platform offering sports, news and entertainment content through subscriptions, add-on features and advertising. The filing covers the fiscal year ended December 31, 2023; it is an annual report rather than a quarterly filing, although the request references 2023 Q4. Fubo operates primarily in the United States and also in Canada, France and Spain. Fubo Sportsbook was discontinued in October 2022, and its results are presented as discontinued operations.
- Paid subscribers at December 31, 2023: approximately 1.618 million in North America and 406,000 in the rest of world, compared with approximately 1.445 million and 420,000, respectively, at December 31, 2022.
- Employees: approximately 530 globally.
- Common shares outstanding at December 31, 2023: 299.2 million; at February 29, 2024: 299.5 million.
Financial performance and key metrics
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $1,368.2 million | $1,008.7 million | +$359.5 million, approximately 35.6% |
| Subscription revenue | $1,249.6 million | $905.9 million | +$343.7 million |
| Advertising revenue | $115.4 million | $101.7 million | +$13.6 million |
| Subscriber-related expenses | $1,213.3 million | $976.4 million | +$236.8 million |
| Operating loss | $(289.4) million | $(411.9) million | Improved by $122.5 million |
| Net loss from continuing operations | $(293.1) million | $(425.0) million | Improved by $131.9 million |
| Net loss attributable to common shareholders | $(287.5) million | $(561.5) million | Improved by $274.0 million |
| Net loss per share | $(1.04) | $(3.08) | Improved |
| Gross profit | $86.1 million | $(41.1) million | Improved by $127.2 million |
| Gross margin | 6.3% | (4.1)% | Improved by 10.4 percentage points |
Subscription revenue growth reflected approximately $205.7 million from subscriber growth and $138.0 million from higher subscription package prices and attachment sales. Advertising revenue increased primarily from more impressions sold, partly offset by lower CPMs. North America ARPU increased to $82.25 from $72.74, while rest-of-world ARPU increased to $6.82 from $6.14.
Sales and marketing expense rose to $207.0 million from $183.6 million, primarily due to increased customer acquisition spending. Technology and development expense declined slightly to $67.7 million, and general and administrative expense declined to $64.3 million from $81.2 million. Stock-based compensation remained significant at $51.2 million.
Cash flow, liquidity and debt
| Metric | 2023 | 2022 |
|---|---|---|
| Net cash used in operating activities, continuing operations | $(173.0) million | $(289.8) million |
| Net cash used in investing activities, continuing operations | $(25.4) million | $(6.0) million |
| Net cash provided by financing activities | $111.2 million | $296.3 million |
| Cash, cash equivalents and restricted cash at year-end | $251.4 million | $343.2 million |
| Accumulated deficit at year-end | $1,845.5 million | $1,558.1 million |
Fubo raised approximately $116.9 million net from issuing 81.7 million shares through its at-the-market program during 2023. This financing materially increased the share count and diluted existing shareholders. The company stated that existing cash and cash equivalents are expected to support operations for at least twelve months from the financial statement issuance date, but it continues to incur operating losses and negative operating cash flow and may seek additional financing.
At December 31, 2023, consolidated indebtedness was approximately $405.4 million, including $397.5 million principal amount of 3.25% convertible notes due 2026 and approximately $7.9 million of other notes and borrowings. In January 2024, Fubo exchanged $205.8 million principal amount of the 2026 notes for $177.5 million of senior secured convertible notes due 2029. The 2029 notes bear interest at 7.5% if paid in cash or 10.0% if paid in kind and are secured by substantially all of the company’s and guarantors’ assets, subject to exclusions. The remaining 2026 notes had an aggregate principal amount of $191.7 million after the exchange.
Material changes versus the prior comparable period
- Revenue grew approximately 36%, led by subscription growth, pricing and attachments.
- Gross profit moved from a loss to positive gross profit, and gross margin improved from negative 4.1% to positive 6.3%.
- Operating loss and continuing-operations net loss narrowed substantially, but the company remained unprofitable.
- Operating cash burn declined by approximately $116.7 million, but remained significant at $173.0 million.
- North American paid subscribers increased, while rest-of-world paid subscribers declined modestly.
- Sales and marketing expense increased, while broadcasting and transmission, technology and development, and general and administrative expenses decreased or were broadly stable.
- Discontinued operations generated $5.2 million of income in 2023, compared with a $136.9 million loss in 2022, primarily from the settlement and remeasurement of Fubo Gaming liabilities. This improvement is not indicative of continuing streaming operations.
- No goodwill impairment charge was recorded in 2023. The company had recorded substantial impairment charges associated with Fubo Sportsbook in 2022.
Guidance, outlook, commentary and risks
The filing does not provide a clear numerical revenue, subscriber, profitability or cash-flow forecast for 2024. Management states that its objective is sustainable and profitable growth through subscriber expansion, ARPU growth, advertising monetization, content-cost discipline, technology investment and international expansion.
- Profitability and liquidity: Fubo has incurred losses since inception, expects future losses and may require additional capital. Its working capital deficit, excluding discontinued operations, was approximately $111.4 million at December 31, 2023.
- Content economics: Subscriber-related expenses represented approximately 88.7% of revenue in 2023. Multi-year sports and programming commitments, content renewals and escalating rights costs may pressure margins and liquidity.
- Seasonality: Revenue and subscriber additions are typically higher in the third and fourth quarters because of football seasons. Subscriber counts commonly decline in the first and second quarters.
- Competition: Fubo competes with traditional pay-TV providers, virtual MVPDs and large technology and media companies, including YouTube TV, Hulu Live, Sling TV and other direct-to-consumer services.
- Antitrust litigation: In February 2024, Fubo sued Disney, ESPN, Hulu, Fox and Warner Bros. Discovery regarding the proposed sports streaming joint venture and alleged bundling and other anticompetitive practices. The outcome and potential financial impact are not estimable.
- Other legal matters: Pending or potential matters include securities litigation, DISH patent litigation, and claims related to Fubo Gaming’s dissolution. The filing does not provide a reliable estimate of potential losses for these matters.
- Cybersecurity: Fubo disclosed a criminal cyberattack and service outage on December 14, 2022. It stated that no cybersecurity threat had materially affected the company as of the filing date, but acknowledged that future incidents could materially affect operations.
- Technology concentration: The company relies heavily on Google Cloud Platform and, for certain components, Amazon Web Services. Disruption or inability to transition providers could impair service.
- Tax and regulatory exposure: The company has substantial federal, state and foreign net operating losses, subject to utilization limitations, and disclosed delinquent tax filings by certain subsidiaries that could result in penalties or interest.
- Internal controls: Management and KPMG concluded that internal control over financial reporting was effective as of December 31, 2023, and KPMG issued an unqualified audit opinion.
Investor verification checklist
- Verify the company’s pace of reducing operating cash burn and whether the $251.4 million of year-end cash and restricted cash is sufficient under current content, debt and operating commitments.
- Assess the January 2024 debt exchange, including the remaining 2026 maturity, the secured 2029 notes, cash-versus-payment-in-kind interest elections and covenant restrictions.
- Track dilution from the 2023 issuance of 81.7 million shares, remaining ATM capacity of approximately $156.3 million at year-end, and additional equity-linked awards or conversions.
- Monitor whether gross margin improvement is sustainable as sports-rights costs, affiliate fees and other subscriber-related expenses increase.
- Reconcile paid subscriber growth with churn, engagement, ARPU, advertising impressions and CPM trends, particularly after seasonal first- and second-quarter declines.
- Review the potential financial and operational effects of the antitrust, patent, securities and Fubo Gaming-related proceedings.
- Review contractual commitments, including approximately $71.9 million of future sports-rights payments, $29.5 million of sponsorship commitments and $43.3 million of operating lease liabilities.
- Confirm the accounting and economic impact of discontinued Fubo Gaming operations separately from the continuing streaming business.