fuboTV(FUBO) - 2021 Q3 - Quarterly Report

PART I - FINANCIAL INFORMATION This section presents fuboTV Inc.'s unaudited condensed consolidated financial statements and detailed notes for the periods ended September 30, 2021, and December 31, 2020 Item 1. Financial Statements This section presents fuboTV Inc.'s unaudited condensed consolidated financial statements, including balance sheets, statements of operations, changes in stockholders' equity, and cash flows, along with detailed notes explaining accounting policies, acquisitions, revenue recognition, debt, equity, and commitments for the periods ended September 30, 2021, and December 31, 2020 Condensed Consolidated Balance Sheets The condensed consolidated balance sheets show a significant increase in total assets, primarily driven by higher cash and cash equivalents and intangible assets, while total liabilities also rose substantially due to new convertible notes, with total stockholders' equity seeing a decrease | Metric | Sep 30, 2021 (in thousands) | Dec 31, 2020 (in thousands) | Change (in thousands) | % Change | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------- | :------- | | Cash and cash equivalents | $393,130 | $134,942 | $258,188 | 191.3% | | Total current assets | $433,008 | $156,714 | $276,294 | 176.3% | | Total assets | $1,160,203 | $859,349 | $300,854 | 35.0% | | Total current liabilities | $251,384 | $227,314 | $24,070 | 10.6% | | Convertible notes, net | $312,119 | $- | $312,119 | N/A | | Total liabilities | $572,922 | $236,401 | $336,521 | 142.4% | | Total stockholders' equity | $587,281 | $622,948 | $(35,667) | -5.7% | | Accumulated deficit | $(897,332) | $(626,456) | $(270,876) | 43.2% | Condensed Consolidated Statements of Operations The company experienced substantial revenue growth in both subscription and advertising segments for the three and nine months ended September 30, 2021, compared to the prior year, with operating expenses also significantly increasing, leading to continued net losses, though the magnitude of the loss decreased year-over-year for both periods | Metric (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Subscription Revenues | $138,119 | $53,433 | $359,601 | $92,945 | | Advertising Revenues | $18,570 | $7,520 | $47,642 | $11,843 | | Total Revenues | $156,690 | $61,202 | $407,294 | $112,669 | | Total Operating Expenses | $259,948 | $363,366 | $656,700 | $500,249 | | Operating Loss | $(103,258) | $(302,164) | $(249,406) | $(387,580) | | Net Loss | $(105,865) | $(274,117) | $(270,981) | $(404,064) | | Basic & Diluted EPS | $(0.74) | $(6.20) | $(2.02) | $(11.00) | Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' Equity The statements reflect significant changes in stockholders' equity, primarily driven by the conversion of Series AA Preferred Stock into common stock, exercise of warrants and stock options, and issuance of common stock through an at-the-market offering, alongside continued net losses - Conversion of Series AA Preferred Stock: 23,219,613 shares of Series AA Preferred Stock were converted into 46,439,226 shares of common stock during the nine months ended September 30, 2021[22] - At-the-Market Offering: The company issued 2,412,968 shares of common stock, generating $69.8 million in additional paid-in capital, net of offering costs, during the three months ended September 30, 2021[22] - Accumulated Deficit: The accumulated deficit increased from $(626,456) thousand at December 31, 2020, to $(897,332) thousand at September 30, 2021, reflecting ongoing net losses[22] Condensed Consolidated Statements of Cash Flows For the nine months ended September 30, 2021, the company experienced a significant net increase in cash, cash equivalents, and restricted cash, primarily driven by substantial cash provided by financing activities, which offset cash used in operating and investing activities | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(143,030) | $(72,450) | | Net cash used in investing activities | $(35,673) | $(1,349) | | Net cash provided by financing activities | $441,014 | $106,314 | | Net increase in cash, cash equivalents and restricted cash | $262,311 | $32,515 | - Financing activities in 2021 were significantly boosted by $389.4 million from convertible notes and $71.8 million from an at-the-market offering[26] - Investing activities in 2021 included $29.7 million for gaming licenses and market access fees, indicating a strategic expansion into online wagering operations[76][214] Notes to Condensed Consolidated Financial Statements The notes provide detailed explanations of the company's financial position, including its business nature, liquidity, significant accounting policies, recent acquisitions, revenue breakdown, intangible assets, debt structure, equity changes, fair value measurements, and legal contingencies, offering crucial context to the condensed financial statements Note 1 - Organization and Nature of Business fuboTV Inc. was incorporated in Florida in 2009, changed its name multiple times, and its common stock began trading on the NYSE in October 2020. The company primarily offers a live TV streaming platform for sports, news, and entertainment, generating revenue from subscriptions and advertising, and launched an online sports betting business in Iowa in November 2021 - fuboTV Inc. changed its name from FaceBank Group, Inc. on August 10, 2020, and its common stock commenced trading on the NYSE on October 8, 2020[33] - The company's primary business is a technology-driven live TV streaming platform for sports, news, and entertainment, with revenues almost entirely from subscription services and advertising in the United States[36] - fuboTV launched a business-to-consumer online sports betting business in Iowa in November 2021 and plans to expand to additional states, having paid $29.7 million for market access agreements during the nine months ended September 30, 2021[38] Note 2 - Liquidity, Going Concern and Management Plans Despite an accumulated deficit and ongoing net losses, fuboTV's cash and cash equivalents of $393.1 million as of September 30, 2021, along with proceeds from convertible notes and an at-the-market offering, provide sufficient liquidity to continue as a going concern for at least one year, with the company not expecting a material long-term impact from COVID-19 on its liquidity - As of September 30, 2021, the Company had cash and cash equivalents of $393.1 million, working capital of $181.6 million, and an accumulated deficit of $897.3 million[40] - The Company issued $402.5 million of convertible notes in February 2021, generating approximately $389.4 million in net proceeds for general corporate purposes[42][43] - During the nine months ended September 30, 2021, the Company received approximately $70.0 million in net proceeds from sales of 2,412,968 shares of common stock through an At-The-Market Sales Agreement[44] Note 3 - Summary of Significant Accounting Policies This note outlines fuboTV's key accounting policies, including principles of consolidation, use of estimates, segment reporting, cash and cash equivalents, and treasury stock, also detailing the calculation of net loss per share and discussing recently issued accounting standards, such as ASU 2016-13 and ASU 2020-06, which will impact future financial reporting - The Company's consolidated financial statements include wholly-owned and controlling interest subsidiaries, with all intercompany balances eliminated[47] - The Company's Chief Executive Officer is the Chief Operating Decision Maker (CODM) and reviews financial information at the consolidated group level, indicating a single operating segment[52] Cash, Cash Equivalents and Restricted Cash (in thousands) | Metric (in thousands) | September 30, 2021 | December 31, 2020 | | :-------------------- | :----------------- | :---------------- | | Cash and cash equivalents | $393,130 | $134,942 | | Restricted cash | $5,402 | $1,279 | | Total cash, cash equivalents and restricted cash | $398,532 | $136,221 | - The Company intends to adopt ASU 2016-13 (Credit Losses) in January 2022, with no material impact expected, and ASU 2020-06 (Convertible Instruments) in January 2022, which will impact accounting for 2026 Convertible Notes and debt discount amortization[62][63] Note 4 – Acquisition On February 26, 2021, fuboTV acquired Vigtory, Inc., a sports betting and interactive gaming company, for $10.3 million, with the acquisition accounted for as a business combination, and substantially all consideration allocated to goodwill, representing expected benefits from Vigtory's assembled workforce - fuboTV acquired Vigtory, Inc. on February 26, 2021, for a purchase price of $10.3 million, including $1.7 million in settled convertible notes and liabilities[66][67] - The acquisition consideration does not include $26.9 million fair value of common shares issued to former Vigtory employee shareholders, which will vest over future service periods[67] - Substantially all of the consideration was allocated to goodwill, which is not tax-deductible and primarily represents the benefits from Vigtory's assembled workforce[68] Note 5 - Revenue from Contracts with Customers fuboTV's revenue is primarily derived from subscription and advertising services, with contract liabilities, mainly from upfront subscription payments, significantly increasing from $17.4 million at December 31, 2020, to $35.9 million at September 30, 2021 Revenue by Type (in thousands) | Revenue Type (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Subscription | $138,119 | $53,433 | $359,601 | $92,945 | | Advertising | $18,570 | $7,520 | $47,642 | $11,843 | | Other | $1 | $249 | $51 | $7,881 | | Total Revenues | $156,690 | $61,202 | $407,294 | $112,669 | - Contract liabilities (deferred revenue) increased from $17.4 million at December 31, 2020, to $35.9 million at September 30, 2021, primarily from upfront subscription payments[73] Note 6 – Property and equipment, net Property and equipment, net, increased significantly from $1.77 million at December 31, 2020, to $5.31 million at September 30, 2021, driven by additions in buildings, computer equipment, and construction-in-progress Property and Equipment, Net (in thousands) | Category (in thousands) | September 30, 2021 | December 31, 2020 | | :---------------------- | :----------------- | :---------------- | | Buildings | $732 | $- | | Computer equipment | $2,467 | $801 | | Construction-in-progress | $1,698 | $- | | Total property and equipment, net | $5,311 | $1,771 | - Depreciation expense for the nine months ended September 30, 2021, was approximately $0.5 million, up from $0.3 million in the prior year period[75] Note 7 – Intangible Assets and Goodwill fuboTV capitalized $30.1 million in intangible assets during the nine months ended September 30, 2021, primarily for gaming licenses and market access fees related to its sports wagering operations, with goodwill increasing by $10.7 million due to the Vigtory acquisition, reaching $489.1 million - During the nine months ended September 30, 2021, the Company capitalized $30.1 million for intangible assets, including $29.7 million for gaming licenses and market access fees[76] Intangible Assets Net Balance (in thousands) | Intangible Asset (in thousands) | September 30, 2021 Net Balance | | :------------------------------ | :----------------------------- | | Customer relationships | $5,920 | | fuboTV tradename | $31,831 | | Software and technology | $151,853 | | Gaming licenses and market access fees | $29,650 | | Total | $219,254 | - Goodwill increased by $10.7 million from the Vigtory acquisition, reaching $489.1 million at September 30, 2021[80] Note 8 – Accounts Payable and Accrued Expenses Total accounts payable and accrued expenses increased to $200.9 million at September 30, 2021, from $157.6 million at December 31, 2020, primarily due to higher affiliate fees, selling and marketing expenses, and taxes Accounts Payable and Accrued Expenses (in thousands) | Category (in thousands) | September 30, 2021 | December 31, 2020 | | :---------------------- | :----------------- | :---------------- | | Affiliate fees | $111,119 | $102,914 | | Selling and marketing | $29,377 | $13,347 | | Taxes | $25,791 | $13,542 | | Total | $200,877 | $157,553 | Note 9 – Income Taxes The company recognized income tax benefits of $1.7 million for the nine months ended September 30, 2021, primarily from the net reduction of its valuation allowance against deferred tax assets, with a portion of deferred tax assets remaining offset by a valuation allowance due to uncertainty of realization - Income tax benefit for the nine months ended September 30, 2021, was $1.7 million, compared to $20.6 million in the prior year, primarily due to the net reduction of the valuation allowance[84] - The Company maintains a partial valuation allowance against its deferred tax assets, as it is not more likely than not that some or all will be realized[85] Note 10 – Notes Payable, Long-Term Borrowing, and Convertible Notes fuboTV's total notes payable and long-term borrowings significantly increased to $317.1 million at September 30, 2021, primarily due to the issuance of $402.5 million in 2026 Convertible Notes, with the company fully repaying its Senior Secured Loan and Paycheck Protection Program Loan during the period Notes Payable, Long-Term Borrowing, and Convertible Notes (in thousands) | Note (in thousands) | Stated Interest Rate | September 30, 2021 | December 31, 2020 | | :------------------ | :------------------- | :----------------- | :---------------- | | 2026 Convertible Notes | 3.25% | $312,119 | $- | | Senior secured loan | LIBOR + 5.25% | $- | $19,556 | | Note payable | 10.0% | $4,942 | $4,558 | | Paycheck Protection Program Loan | 1.0% | $- | $4,699 | | Total | | $317,097 | $28,848 | - The 2026 Convertible Notes, issued February 2, 2021, have an initial conversion price of $57.78 per share and mature on February 15, 2026, with the Company recognizing a debt discount of $90.9 million[88][90] - The Senior Secured Loan was fully repaid on May 7, 2021, and the Paycheck Protection Program Loan was repaid on February 26, 2021[92][97] Note 11 – Fair Value Measurements The company's warrant liabilities, classified as Level 3 liabilities, decreased from $22.7 million at December 31, 2020, to $8.3 million at September 30, 2021, primarily due to redemptions and changes in fair value, estimated using a Black-Scholes model Financial Liabilities at Fair Value (in thousands) | Financial Liabilities at Fair Value (in thousands) | September 30, 2021 | December 31, 2020 | | :----------------------------------------------- | :----------------- | :---------------- | | Warrant liabilities (Level 3) | $8,320 | $22,686 | | Total | $8,320 | $22,686 | - The fair value of warrant liabilities decreased by $14.3 million during the nine months ended September 30, 2021, driven by redemptions ($16.5 million) and a net change in fair value[102] - The Black-Scholes model inputs for September 30, 2021, included a weighted average expected volatility of 49.5% and a weighted average expected term of 0.40 years[102] Note 12 – Stockholders' Equity Stockholders' equity was significantly impacted by the conversion of all Series AA Preferred Stock into common stock, an at-the-market offering generating $70.0 million, and stock-based compensation expenses totaling $46.5 million for the nine months ended September 30, 2021, with the company also issuing treasury stock for an acquisition and seeing warrant exercises - All 23,219,613 shares of Series AA Preferred Stock were converted into 46,439,226 shares of common stock by March 1, 2021[103] - The Company received $70.0 million in net proceeds from selling 2,412,968 shares of common stock through an At-the-Market Sales Agreement during the nine months ended September 30, 2021[107] Stock-based Compensation (in thousands) | Stock-based Compensation (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Subscriber related | $13 | $12 | $43 | $19 | | Sales and marketing | $821 | $1,010 | $2,324 | $1,635 | | Technology and development | $1,535 | $2,303 | $12,156 | $3,498 | | General and administrative | $10,298 | $2,980 | $31,949 | $18,929 | | Total | $12,667 | $6,305 | $46,472 | $24,081 | Note 13 – Commitments and Contingencies fuboTV's lease expenses increased, with new significant lease agreements for corporate headquarters in New York and office space in Chicago, and the company is also involved in several legal proceedings, including a class action securities lawsuit and a derivative lawsuit, which it intends to vigorously defend Lease Expense (in thousands) | Lease Expense (in thousands) | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :--------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Operating lease cost | $469 | $312 | $1,248 | $623 | | Total rent expense | $688 | $312 | $1,467 | $623 | - The Company entered into a twelve-year lease for new corporate headquarters in New York, with annual fixed rent starting at $4.1 million for the first four years, commencing in Q4 2021[126] - fuboTV is a defendant in a consolidated class action securities lawsuit alleging false and misleading statements regarding financial health and operating condition, which it believes is without merit and intends to vigorously defend[131][135] Note 14 – Subsequent Events Subsequent to the reporting period, fuboTV entered into agreements to acquire Edisn Inc., an AI-powered computer vision platform, for $20 million, and Molotov SAS, a French television streaming platform, for approximately $190 million, both to be paid in cash and common stock - On November 4, 2021, fuboTV agreed to acquire Edisn Inc., an AI-powered computer vision platform, for $20 million in cash and common stock[141] - On November 9, 2021, fuboTV agreed to acquire Molotov SAS, a French television streaming platform, for €164.3 million (approximately $190 million), with at least 85% expected to be paid in common stock[142] Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations This section provides management's perspective on fuboTV's financial condition and operational results, highlighting significant revenue growth driven by subscriber increases and advertising, alongside rising operating expenses, detailing the company's strategy, the impact of acquisitions, restatements, seasonality, and its liquidity position, emphasizing the expansion into wagering and the use of non-GAAP metrics Overview fuboTV's business model focuses on acquiring subscribers through sports content, enhancing engagement with technology, and increasing monetization through higher ARPU, with a strategic expansion into wagering and interactivity to create a flywheel effect - fuboTV's business motto is "come for the sports, stay for the entertainment," leveraging sports to acquire subscribers at lower costs[146] - The company aims to monetize its engaged subscriber base by driving higher Average Revenue Per User (ARPU) through technology and data[146] - Expected expansion into wagering and interactivity is core to the model, aiming to enhance the sports streaming experience, increase engagement, expand advertising revenue, and create additional Attachment sales opportunities[147] Incorporation This section clarifies the corporate identity of fuboTV Inc. and its subsidiaries, detailing the merger with fuboTV Pre-Merger on April 1, 2020, and the subsequent conversion of Series AA Preferred Stock into common stock in early 2021 - fuboTV Inc. is the combined entity after the merger of fuboTV Acquisition Corp. with fuboTV Pre-Merger on April 1, 2020[152] - All Series AA Preferred Stock was converted into common stock by March 1, 2021, through an exchange offer, resulting in 26,824,492 shares of common stock issued[152] Nature of Business fuboTV operates as a leading live TV streaming platform, primarily generating revenue from subscriptions and advertising in the U.S., with recent expansion into Canada and Spain, and launched an online sports betting business in Iowa in November 2021, investing $29.7 million in market access agreements - The Company is a leading live TV streaming platform for sports, news, and entertainment, with revenues primarily from subscription services and advertising in the United States[154] - fuboTV launched an online sports betting business in Iowa in November 2021 and plans further state expansion, having spent $29.7 million on market access agreements[156] Restatement of Financial Statements fuboTV restated certain financial statements due to errors in accounting for goodwill related to acquisitions and an overstatement of loss on issuance of common stock and warrants, with these restatements correcting goodwill impairment and properly allocating purchase price to warrant liabilities - The Company restated financial statements for errors in goodwill accounting related to Nexway AG and Facebank AG acquisitions, where $79.7 million of goodwill should not have been impaired[157] - An error in warrant accounting led to a $26.2 million overstatement of loss on issuance of common stock and warrants; the purchase price should have been allocated to warrant liability[160] Seasonality fuboTV experiences significant seasonality, with higher revenue and subscriber additions in the third and fourth quarters, primarily driven by sports leagues like the NFL and increased TV streaming during the holiday season, which also leads to higher advertising sales but increased marketing expenses - The Company generates significantly higher revenue and subscriber additions in the third and fourth quarters, primarily due to sports leagues (e.g., NFL) and increased TV streaming during the holiday season[163] - Seasonality also impacts advertising sales, with higher demand in Q4, but also results in greater marketing expenses to attract new subscribers[163] Components of Results of Operations This section defines the key components of fuboTV's financial results: Subscription revenue from streaming plans, Advertising revenue from ad impressions, and Other revenue from sub-licensing rights, with operating expenses including subscriber-related costs, broadcasting, sales & marketing, technology & development, general & administrative, and depreciation & amortization, while other income/expense covers financial instruments and debt-related items, and income tax benefit reflects deferred tax asset changes - Subscription revenue is derived from streaming plans, while advertising revenue comes from fees charged to advertisers for impressions within streamed content[164][165] - Key operating expenses include subscriber related expenses (affiliate distribution rights), broadcasting and transmission costs, sales and marketing, technology and development, and general and administrative expenses[167][168][169][170][171] - Other income (expense) primarily consists of issuance gains/losses, changes in fair value of financial instruments, interest expense, and loss on deconsolidation of subsidiaries[173] Results of Operations for the three and nine months ended September 30, 2021 and 2020 fuboTV reported substantial revenue growth for both the three and nine months ended September 30, 2021, driven by increased subscribers and advertising, with operating expenses also rising significantly across all categories, leading to continued operating and net losses, albeit reduced compared to the prior year due to lower impairment charges Consolidated Statements of Operations Summary (in thousands) | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Total Revenues | $156,690 | $61,202 | $407,294 | $112,669 | | Subscription Revenue | $138,119 | $53,433 | $359,601 | $92,945 | | Advertising Revenue | $18,570 | $7,520 | $47,642 | $11,843 | | Total Operating Expenses | $259,948 | $363,366 | $656,700 | $500,249 | | Subscriber related expenses | $143,370 | $61,228 | $377,177 | $114,315 | | Sales and marketing | $50,381 | $22,269 | $94,038 | $33,526 | | Technology and development | $15,257 | $10,727 | $46,696 | $20,277 | | General and administrative | $27,288 | $8,270 | $73,735 | $42,130 | | Operating Loss | $(103,258) | $(302,164) | $(249,406) | $(387,580) | | Net Loss | $(105,865) | $(274,117) | $(270,981) | $(404,064) | - Revenue increase for the nine months ended September 30, 2021, was primarily due to a full nine months of fuboTV operations in 2021 compared to six months in the prior year, alongside growth in subscriber base and package prices[178] - Operating loss decreased significantly for both periods year-over-year, largely due to the absence of the $236.7 million impairment of intangible assets and goodwill recognized in the prior year[176] Key Metrics & Non-GAAP Measures fuboTV uses non-GAAP metrics like Monthly Average Revenue Per User (ARPU), Monthly Average Cost Per User (ACPU), and Adjusted Contribution Margin (ACM) to evaluate core operating performance, with ARPU and ACPU increasing for both the three and nine months ended September 30, 2021, while ACM saw a slight decrease for the three-month period and remained stable for the nine-month period - Paid subscribers are defined as total subscribers with an activated payment method from whom fuboTV has collected payment in the month ending the relevant period, excluding free trial users[196] Non-GAAP Key Metrics | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Average Subscribers | 751,679 | 333,549 | 657,755 | 301,545 | | Non-GAAP Monthly ARPU | $74.54 | $67.70 | $71.92 | $59.34 | | Non-GAAP Monthly ACPU | $65.31 | $56.78 | $65.42 | $53.95 | | Non-GAAP Adjusted Contribution Margin | 12.4% | 16.1% | 9.0% | 9.1% | - Content Hours, defined as total hours of content watched on the fuboTV platform, is used to gauge user engagement[197] Liquidity and Capital Resources fuboTV's liquidity is primarily supported by subscriber and advertising revenue, along with proceeds from equity and debt financings, with the company having $398.5 million in cash and cash equivalents as of September 30, 2021, bolstered by a $389.4 million convertible note offering and a $70.0 million at-the-market equity offering, providing sufficient capital for at least the next twelve months despite ongoing losses - Primary cash sources are subscriber and advertising revenue, and proceeds from equity and debt financings[205] - As of September 30, 2021, fuboTV had $398.5 million in cash and cash equivalents, providing liquidity for at least the next twelve months[206][208] - The company successfully raised $389.4 million (net) from 3.25% senior convertible notes in February 2021 and $70.0 million (net) from an at-the-market common stock offering[205][206] Cash Flows For the nine months ended September 30, 2021, fuboTV's net cash provided by financing activities significantly increased to $441.0 million, primarily from convertible notes and equity offerings, offsetting $143.0 million used in operating activities and $35.7 million used in investing activities, resulting in a net increase in cash of $262.3 million | Cash Flow Activity (in thousands) | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :-------------------------------- | :-------------------------- | :-------------------------- | | Net cash used in operating activities | $(143,030) | $(72,450) | | Net cash used in investing activities | $(35,673) | $(1,349) | | Net cash provided by financing activities | $441,014 | $106,314 | | Net increase in cash, cash equivalents and restricted cash | $262,311 | $32,515 | - Operating cash outflow in 2021 was $143.0 million, driven by a net loss of $271.0 million, partially offset by non-cash adjustments and changes in operating assets and liabilities[212] - Investing activities in 2021 included $29.7 million for gaming licenses and market access fees, and $3.9 million for capital expenditures[214] Off-Balance Sheet Arrangements As of September 30, 2021, fuboTV Inc. reported no off-balance sheet arrangements - As of September 30, 2021, there were no off-balance sheet arrangements[218] Critical Accounting Policies fuboTV's critical accounting policies involve significant estimates and assumptions, including fair value allocation in acquisitions, recoverability of goodwill and intangibles, valuation of warrants and equity instruments, and income tax accounting, with no material changes to these policies reported from the prior annual report - Critical accounting policies require management to make estimates and assumptions affecting reported assets, liabilities, revenues, and expenses[219] - Key estimates include fair value allocation in business acquisitions, recoverability of goodwill and intangible assets, and valuation of warrants, convertible notes, and equity instruments[219] - There have been no material changes to critical accounting policies from those disclosed in the Annual Report[220] Recently Issued Accounting Pronouncements This section refers to Note 3 for a discussion of recently issued accounting pronouncements, indicating that relevant updates are detailed within the financial statement notes - Information on recently issued accounting pronouncements is detailed in Note 3, 'Summary of Significant Accounting Policies,' within the unaudited condensed consolidated financial statements[221] Item 3. Quantitative and Qualitative Disclosures About Market Risk This item is not required for smaller reporting companies, and therefore, fuboTV Inc. has not provided quantitative and qualitative disclosures about market risk - Quantitative and Qualitative Disclosures about Market Risk are not required for smaller reporting companies[222] Item 4. Controls and Procedures fuboTV's disclosure controls and procedures were deemed ineffective as of September 30, 2021, due to material weaknesses in internal control over financial reporting, particularly concerning non-routine transactions and business combinations, with management actively implementing remediation plans, including hiring experienced personnel and designing additional controls, to address these deficiencies - Disclosure controls and procedures were not effective as of September 30, 2021, due to material weaknesses in internal control over financial reporting[223] - Material weaknesses identified in 2020 related to the accounting for non-routine transactions, including business combinations and the allocation of consideration to acquired assets and assumed liabilities[225] - Management's remediation plan includes hiring additional accounting personnel, designing controls for technical accounting guidance, and engaging a third-party for internal audit services[226][228] Evaluation of Disclosure Controls and Procedures fuboTV's management concluded that its disclosure controls and procedures were not effective as of September 30, 2021, due to identified material weaknesses in internal control over financial reporting - The Chief Executive Officer and Chief Financial Officer concluded that disclosure controls and procedures were not effective as of September 30, 2021[223] - Ineffectiveness was attributed to material weaknesses in internal control over financial reporting, as described in the amended Annual Report on Form 10-K[223] Material Weaknesses Material weaknesses in internal control over financial reporting were identified in 2019 and 2020, specifically concerning the inappropriate application of U.S. GAAP and the accounting for non-routine transactions like business combinations, with management asserting that the financial statements fairly present the company's financial position despite these weaknesses - Material weaknesses were identified in 2019 and 2020 related to the inappropriate application of U.S. GAAP and accounting for non-routine transactions, including business combinations[224][225] - Specifically, internal controls for business combinations and the review of accounting considerations for non-routine transactions were not appropriately designed[225] - Management concluded that the consolidated financial statements in this 10-Q fairly present the company's financial position, results of operations, and cash flows, despite the material weaknesses[225] Management's Remediation Plan Management is actively remediating material weaknesses by enhancing financial and legal due diligence for acquisitions, evaluating valuation specialists, preparing comprehensive accounting memoranda, hiring additional accounting personnel with technical expertise, and implementing specific procedures for tax accounting and Sarbanes-Oxley compliance - Remediation efforts for non-routine transactions include extensive financial and legal due diligence, board approval, and evaluation of valuation specialists for acquisitions[226][228] - The company has hired additional accounting personnel with GAAP technical expertise and designed new controls for identifying, documenting, and applying technical accounting guidance[228] - Specific procedures have been implemented for tax accounting review, and work continues with a third-party provider to strengthen Sarbanes-Oxley compliance[228] Changes in Internal Control over Financial Reporting Except for the remediation efforts described, there were no other changes in internal control over financial reporting during the quarter ended September 30, 2021, that materially affected or are reasonably likely to materially affect the company's internal control over financial reporting - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2021, other than the previously described remediation efforts[229] PART II - OTHER INFORMATION This section covers fuboTV Inc.'s legal proceedings, risk factors, and other disclosures not included in the financial statements Item 1. Legal Proceedings fuboTV is involved in several legal proceedings, including a consolidated class action securities lawsuit alleging false statements and a derivative lawsuit, both of which the company intends to vigorously defend, with a separate derivative lawsuit dismissed with prejudice in July 2021, and another claim for monetary damages pending resolution - fuboTV is a defendant in a consolidated class action securities lawsuit (In re fuboTV Inc. Securities Litigation) alleging violations of federal securities laws through false and misleading statements[231][233] - A derivative lawsuit (Rosenfeld v. Edgar Bronfman Jr. et al.) against certain directors and officers, alleging breach of fiduciary duties and corporate waste, was dismissed with prejudice on July 28, 2021[236][238] - Another lawsuit (Andrew Kriss and Eric Lerner vs. FaceBank Group, Inc. et. al.) seeks monetary damages of at least $6 million, with fuboTV having filed a motion to dismiss[239][140] Said-Ibrahim v. fuboTV Inc. Securities Litigation Two class action lawsuits, Said-Ibrahim v. fuboTV Inc. and Lee v. fuboTV, Inc., were consolidated into In re fuboTV Inc. Securities Litigation, with plaintiffs alleging federal securities law violations due to false statements regarding fuboTV's financial health and market prospects, and fuboTV denying the claims and intending to vigorously defend the litigation - Two class action lawsuits were consolidated under In re fuboTV Inc. Securities Litigation, alleging federal securities law violations by fuboTV and its officers[231][233] - Plaintiffs claim false and misleading statements were made regarding fuboTV's financial health, subscription growth, profitability, and entry into the online sports wagering market[231] - fuboTV believes the claims are without merit and intends to vigorously defend the litigation[235] Rosenfeld v. Edgar Bronfman Jr. et al. (Derivative Lawsuit) A derivative lawsuit filed by Robert Rosenfeld against fuboTV's directors and officers, alleging breach of fiduciary duties and corporate waste, was voluntarily dismissed with prejudice on July 28, 2021, after the plaintiff acknowledged the defendants' arguments were well-founded - Robert Rosenfeld filed a derivative lawsuit against fuboTV's directors and officers, alleging breach of fiduciary duties and corporate waste, mirroring allegations in the securities class action[236] - The plaintiff, jointly with derivative defendants, requested voluntary dismissal with prejudice, which the court approved on July 28, 2021[238] Andrew Kriss and Eric Lerner vs. FaceBank Group, Inc. et. al. Andrew Kriss and Eric Lerner filed a lawsuit against FaceBank Group, Inc. and others, asserting claims including breach of contract and fraud, seeking at least $6 million in damages, with fuboTV believing the claims lack merit and having filed a motion to dismiss - Andrew Kriss and Eric Lerner filed a lawsuit against FaceBank Group, Inc. and others, alleging breach of contract, fraud, and unjust enrichment[239] - Plaintiffs seek monetary damages of at least $6 million[140] - fuboTV believes the claims are without merit and has filed a motion to dismiss all claims against it[140] Item 1A. Risk Factors This section outlines significant risks that could adversely affect fuboTV's business, financial condition, and operating results, spanning financial stability, competitive landscape, content relationships, regulatory compliance (especially for sports betting), operational challenges, cybersecurity, intellectual property, and stock ownership, emphasizing the company's history of losses and the evolving nature of its industry Risk Factors Summary fuboTV faces material risks including potential deviations from financial guidance, the need for additional capital, ongoing operating losses, seasonality, challenges in subscriber acquisition and retention, content licensing issues, reliance on cloud platforms, measurement inaccuracies, intense competition in TV streaming and gaming, and extensive regulatory oversight for its sports betting operations - Key risks include potential for operating results to differ from guidance, need for additional capital, and continued operating losses[243][246] - Challenges in attracting and retaining subscribers, content licensing, and competition from large technology and entertainment companies are significant[244] - Expansion into the heavily regulated gaming industry exposes the company to risks related to licensure, compliance, trading, and reliance on third-party data[244] Risks Related to Our Financial Position and Capital Needs fuboTV has a history of operating losses and expects them to continue, necessitating additional capital that may dilute existing shareholders or impose restrictive debt covenants, with the business also subject to seasonality, which can impact revenue and gross profit, and facing limitations on utilizing net operating loss carryforwards due to past ownership changes and tax law changes - fuboTV has incurred losses since inception and expects to continue doing so, with a net loss of $105.9 million for the three months ended September 30, 2021[246] - The company may require additional capital, which could lead to significant dilution for existing shareholders or restrictive covenants in new debt financing[247] - Seasonality, driven by sports leagues and holiday advertising, significantly impacts revenue and gross profit, making accurate forecasting critical[249] - The company's ability to use net operating loss carryforwards may be limited by Section 382 of the Internal Revenue Code due to past and potential future ownership changes[253] Risks Related to Our Relationships with Content Providers, Customers and Other Third Parties fuboTV's business is highly dependent on maintaining favorable relationships with content providers and effectively attracting and retaining subscribers, with long-term content commitments, content restrictions, and parity obligations with distribution partners limiting operational flexibility and adversely impacting margins and subscriber growth, and failure to secure popular content or manage ad inventory potentially harming the business - Long-term content commitments, often with minimum license fees, limit operating flexibility and can adversely impact margins if subscriber acquisition and retention fall short of expectations[262] - The ability to attract and retain subscribers depends on consistently providing compelling content and effectively marketing the platform, with competition and subscriber churn posing significant challenges[266] - Content providers impose significant restrictions on distribution, marketing, and content packaging, limiting fuboTV's ability to innovate or negotiate favorable terms[273] - Reliance on Google Cloud Platform (GCP) and Amazon Web Services (AWS) for computing infrastructure means any disruption or competitive action by these providers could adversely impact operations[281] Risks Related to Our Financial Reporting and Disclosure fuboTV has identified material weaknesses in its internal control over financial reporting, particularly concerning non-routine transactions, which could undermine investor confidence, with the company's financial results subject to significant estimates and potential fluctuations, making guidance inherently speculative, and failure to comply with Exchange Act reporting obligations or to improve operational and financial systems potentially adversely affecting the business - Material weaknesses in internal control over financial reporting, identified in 2019 and 2020, particularly for non-routine transactions, could lead to investor loss of confidence[282][284] - Financial guidance is inherently speculative, and actual results may differ significantly, potentially causing the stock price to decline[286][287] - Failure to comply with Exchange Act reporting obligations or to improve operational and financial systems to support growth could adversely affect billing services and financial reporting[288][294] - Key metrics and other estimates are subject to inherent measurement challenges, and inaccuracies could harm reputation and business[295][297] Risks Related to Our Products and Technologies fuboTV operates in a highly competitive TV streaming market, facing challenges from large technology and entertainment companies, with its expansion into sports betting introducing new risks, including regulatory complexities, potential for significant losses from betting outcomes, reliance on third-party data, and the need to gain market access in legalized states, and technology failures or an inability to diversify content beyond live sports potentially harming the business - The TV streaming market is highly competitive, with large technology and entertainment companies posing significant challenges to subscriber attraction and retention[301][304] - Expansion into sports betting subjects the business to unsettled and developing U.S. and foreign laws, with risks of regulatory restrictions, taxes, and potential civil/criminal proceedings[311][312][314] - Sports betting operations expose fuboTV to risks like trading volatility, human error in odds compilation, reliance on third-party data, and the impact of event cancellations[316][318] - The success of the sports betting business depends on gaining market access in states that legalize sports wagering, which may be limited by state laws on the number of 'skins' per license[319] Risks Related to Regulation fuboTV's gaming operations are subject to extensive and evolving regulations, requiring licenses and approvals that can be revoked or denied, impacting market access and operations, with shareholders potentially facing suitability investigations by gaming authorities, and the company exposed to risks from changing internet regulations, payment processing, and tax liabilities across multiple jurisdictions, alongside public opinion influencing sports wagering regulation - The gaming industry is heavily regulated, requiring fuboTV and its associated persons to obtain and maintain licenses and approvals, which can be revoked or suspended[329][332] - Shareholders may be subject to suitability investigations by gaming authorities, with potential for ownership restrictions if deemed unsuitable[340] - Changes in government regulations related to the Internet, user privacy, data protection, payment processing, and taxation could increase operating expenses and alter business practices[345][348][350][351] - Social responsibility concerns and negative public opinion can significantly influence sports wagering regulation, potentially leading to harsher restrictions or prohibition[353][354] Risks Related to Our Operations fuboTV's operations are vulnerable to the ongoing COVID-19 pandemic, which could impact content availability, subscriber demand, and employee productivity, with the company also facing risks from historical corporate transaction defects, potential litigation, challenges in customer support, and complexities of international operations, and its success relying heavily on attracting and retaining key personnel and managing future acquisitions - The COVID-19 pandemic poses risks to content availability (e.g., live sports), subscriber demand, customer service, and employee productivity[356][357] - Defects in historical corporate transactions could lead to claims, dilution of shareholders, or payments, adversely affecting financial condition[358][359] - Legal proceedings can incur unforeseen expenses and divert management's time, negatively impacting business operations and financial position[360] - Success depends on attracting, retaining, and motivating highly skilled key personnel, including senior management, in a competitive digital media industry[365] Risks Related to Privacy and Cybersecurity fuboTV is subject to complex and evolving privacy, security, and data protection laws globally, including CCPA, CPRA, VCDPA, and GDPR, with non-compliance or perceived failures potentially resulting in substantial costs, regulatory investigations, litigation, reputational damage, and restrictions on business operations, and cybersecurity threats, service interruptions, and unauthorized data access also posing significant risks to the company's systems and subscriber information - The company is subject to various international, federal, and state laws and regulations governing personal information processing, including CCPA, CPRA, VCDPA, and GDPR[374][375][377] - Non-compliance or perceived failures in privacy and data protection could lead to substantial operational costs, regulatory investigations, litigation, and reputational harm[380][383] - Computer systems are vulnerable to cybersecurity threats, including cyber-attacks, which could result in service disruptions, unauthorized data disclosure, or theft of intellectual property[384][386] - Reliance on third-party cloud computing and content delivery networks means disruptions in these services could adversely impact user experience[387] Risks Related to Our Intellectual Property fuboTV faces risks of intellectual property litigation, including claims of infringement or misappropriation, which could be costly and divert management resources, with the company relying on a combination of confidentiality agreements, trademarks, copyrights, patents, and trade secret laws to protect its proprietary rights, but these may not prevent unauthorized use or appropriation by competitors, and the use of open-source software and the need for third-party technology licenses also posing potential limitations and risks - The company could face costly litigation regarding intellectual property rights, including claims of infringement or misappropriation, which may divert management attention[390] - Reliance on confidentiality agreements, trademarks, copyrights, patents, and trade secret laws may not adequately protect proprietary rights from competitors[395] - The use of open-source software could impose limitations on commercialization if licenses are construed to require proprietary software to be made available to third parties[397] - Inability to obtain necessary or desirable third-party technology licenses could impair the development of platform enhancements and harm competitiveness[398] Risks Related to the 2026 Convertible Notes fuboTV may lack sufficient funds to settle conversions or repurchase its 2026 Convertible Notes in cash, potentially leading to default or adverse impacts on liquidity, with the accounting method for these notes, particularly under ASC 470-20 and future ASU 2020-06, resulting in higher non-cash interest expense and potentially affecting reported financial results and diluted EPS, and provisions in the indenture also deterring favorable business combinations - The company may not have sufficient cash or financing to settle conversions or repurchase the 2026 Convertible Notes, potentially leading to default under the indenture[399][400] - The conditional conversion feature, if triggered, could adversely affect liquidity by requiring cash settlement or reclassification of debt as a current liability[401] - Accounting for convertible debt under ASC 470-20 and ASU 2020-06 will result in greater non-cash interest expense and could adversely affect reported net losses and diluted EPS[402][404] - Provisions in the indenture, such as repurchase rights upon a fundamental change, may deter or prevent business combinations favorable to shareholders[405] Risks Related to Ownership of our Common Stock fuboTV's stock price is highly volatile due to various factors, including operating results, market sentiment, and competition, with the potential for substantial sales of common stock by existing shareholders, especially after lock-up expirations and through at-the-market offerings, potentially depressing the market price, and the c