Fubotv Inc. — Form 10-Q Summary
Business Context and Reporting Period
FuboTV operates a live television streaming platform focused on sports, news and entertainment, with subscription and advertising revenue primarily in the United States and additional operations in Canada, Spain and France. The filing covers the three and six months ended June 30, 2023. Fubo Gaming and Fubo Sportsbook were dissolved and ceased operations in October 2022; their results are presented as discontinued operations.
Key Financial Metrics
| Metric | Q2 2023 | Q2 2022 | Six Months 2023 | Six Months 2022 |
|---|---|---|---|---|
| Total revenue | $312.7 million | $222.1 million | $637.1 million | $464.4 million |
| Subscription revenue | $289.0 million | $199.9 million | $589.9 million | $419.1 million |
| Advertising revenue | $23.1 million | $22.0 million | $45.8 million | $45.2 million |
| Operating loss | $(52.5) million | $(91.4) million | $(134.0) million | $(214.3) million |
| Net loss from continuing operations | $(54.2) million | $(95.0) million | $(137.6) million | $(223.3) million |
| Net loss attributable to common shareholders | $(49.9) million | $(116.1) million | $(133.6) million | $(256.8) million |
| Basic and diluted loss per share | $(0.17) | $(0.63) | $(0.51) | $(1.50) |
| Gross profit | $23.5 million | $(14.0) million | $26.7 million | $(37.6) million |
| Gross margin | 7.5% | (6.3)% | 4.2% | (8.1)% |
Operating expenses were $365.3 million in the second quarter and $771.1 million for the first six months. Subscriber-related expenses remained the largest cost category at $271.0 million in Q2 and $572.3 million year to date. Stock-based compensation was $13.1 million in Q2 and $26.7 million year to date.
Paid subscribers were approximately 1.2 million in North America and 0.4 million in the rest of the world at June 30, 2023, compared with approximately 0.9 million and 0.3 million, respectively, at June 30, 2022. North America monthly ARPU increased to $81.62 in Q2 from $72.19, while rest-of-world ARPU increased to $6.91 from $5.97.
Cash Flow, Liquidity and Debt
- Cash and cash equivalents were $293.5 million at June 30, 2023, and total cash, cash equivalents and restricted cash was $299.7 million, down from $343.2 million at December 31, 2022.
- Net cash used in operating activities was $148.1 million from continuing operations and $149.3 million including discontinued operations for the first six months of 2023, compared with $202.6 million and $217.0 million, respectively, in the prior-year period.
- Investing cash outflow was $8.7 million, principally reflecting $8.4 million of capitalized internal-use software.
- Financing cash inflow was $114.4 million, primarily from $116.9 million of net ATM equity proceeds.
- The company had $402.5 million principal amount of 3.25% convertible notes due 2026, reported at $395.4 million net of discount, plus approximately $7.7 million of other notes and borrowings. A $6.0 million CAM Digital note, including accrued interest and penalties, was in default and subject to litigation.
- Management stated that existing cash and cash equivalents are expected to support operations for at least one year from issuance of the financial statements, while also noting continuing losses and negative operating cash flow.
Material Changes Versus the Prior Comparable Period
- Revenue increased 40.8% in Q2 and 37.2% for the first six months, driven primarily by subscriber growth, higher subscription package prices and increased attachments.
- Subscription revenue increased by $89.1 million in Q2 and $170.8 million year to date. Advertising revenue increased only modestly, with higher impressions offset partly by lower CPMs.
- Gross profit improved by $37.5 million in Q2 and $64.3 million year to date, producing positive gross margins in 2023.
- Operating loss narrowed by $38.9 million in Q2 and $80.4 million year to date, helped by lower general and administrative expense, lower depreciation and amortization year to date, and increased revenue.
- Fubo raised $116.9 million net through its ATM program by selling 81.7 million shares at a weighted-average gross price of $1.46 per share, materially increasing shares outstanding and diluting existing holders.
- Discontinued operations generated income of $4.3 million in Q2 and $4.0 million year to date, principally from a $4.7 million gain on extinguishment or reevaluation of certain Fubo Gaming liabilities, versus significant losses in the prior-year periods.
Guidance, Outlook, Risks and Unusual Items
The filing does not provide a clear numerical quarterly or annual revenue, subscriber or profitability guidance value. Management expects continued losses and substantial cash requirements, although it believes current liquidity supports the business for at least the next twelve months. Management indicated no current plans for further ATM sales, but may seek additional capital if needed.
- Content and affiliate distribution costs are the company’s largest expenses. Multi-year sports-rights commitments may constrain flexibility, liquidity and margins, particularly if subscriber growth or pricing does not offset cost increases.
- Results are seasonal, with higher revenue and subscriber additions generally expected in the third and fourth quarters, particularly around major sports leagues.
- The company faces intense competition from major technology, entertainment, cable and streaming providers, and depends on subscriber retention, advertising monetization and favorable content renewals.
- Fubo relies heavily on Google Cloud Platform and Amazon Web Services; service interruptions, cybersecurity incidents or cloud-provider issues could materially affect operations.
- Pending matters include securities litigation, a Dynamo arbitration related to the Fubo Gaming dissolution, potential additional claims by former gaming partners, and unresolved patent licensing discussions. The company cannot reasonably estimate potential losses for the Dynamo matter or patent discussions.
- Operating lease commitments totaled $64.9 million of future minimum payments, and sports-rights commitments totaled $96.3 million as of June 30, 2023.
- Goodwill was $621.1 million and intangible assets were $166.4 million. The streaming reporting unit had only a 3.5% excess of estimated fair value over carrying value in the December 31, 2022 impairment test, creating sensitivity to adverse operating or market conditions.
- After period end, the company adopted a 2023 inducement equity plan reserving 3.0 million shares and adopted an executive severance plan. Two executives also entered Rule 10b5-1 arrangements covering potential sales of company shares.
Important Facts for Investors to Verify
- Whether revenue growth and higher ARPU can continue to offset rising content, affiliate and other subscriber-related costs.
- The pace of operating cash burn and the amount of additional capital required before the 2026 convertible notes mature.
- The potential dilution from ATM equity sales, equity compensation, convertible notes and additional share-sale capacity.
- The status and potential financial exposure of the CAM Digital note default, securities litigation, Dynamo arbitration and other Fubo Gaming-related claims.
- Whether the streaming reporting unit’s narrow impairment headroom changes as market capitalization, subscriber growth, margins and cash flows evolve.
- Subscriber trends, churn, acquisition costs, advertising CPMs and the company’s ability to improve gross margin during the seasonally stronger second half of the year.