FuboTV Inc. 10-K

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. You should read the following discussion and analysis of our financial condition and results of operations together with our consolidated financial statements and the related notes and other financial information included elsewhere in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our business, includes forward-looking statements that involve risks and uncertainties. You should review the sections titled “Cautionary Note Regarding Forward-Looking Statements” and “Risk Factors” for a discussion of forward-looking statements and important factors that could cause actual results to differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis. Our historical results are not necessarily indicative of the results that may be expected for any period in the future . The results of our operations for the year ended December 31, 2021 are not readily comparable against the results of our operations for the year ended December 31, 2020 as a result of our acquisitions of fuboTV Pre-Merger during 2020 and the acquisitions of Facebank AG and Nexway AG during 2019 that were disposed of in 2020. Overview Our business motto is “come for the sports, stay for the entertainment.” First, we leverage sporting events to acquire subscribers at lower acquisition costs, given the built-in demand for sports. We then leverage our technology and data to drive higher engagement and induce retentive behaviors such as favoriting channels, recording shows, and increasing discovery through our proprietary machine learning recommendations engine. Next, we look to monetize our growing base of highly engaged subscribers by driving higher average revenue per user. We believe our expected expansion into wagering and interactivity is core to this model. We believe free-to-play predictive games enhance the sports streaming experience - while also providing a bridge between video and our sportsbook. We expect the continued integration of gaming with our expansive live sports coverage will create a flywheel that lifts engagement and retention, expands advertising revenue through increased viewership, and creates additional opportunities for Attachment sales. We drive our business model with three core strategies: ● Grow our paid subscriber base ● Optimize engagement and retention ● Increase monetization. COVID-19 Update The widespread global impact from the outbreak and spread of the COVID-19 pandemic continued throughout 2021. We took precautionary measures to protect the health and safety of our employees and slow down the spread of the virus by transitioning our workforce to remote working as we closed our offices. The global spread of COVID-19 and the various attempts to contain it created significant volatility, uncertainty, and economic disruption in 2020. The impact of the COVID-19 pandemic on our operations began towards the end of the first quarter of 2020, impacting advertising markets and the availability of live sport events, as numerous professional and college sports leagues cancelled or altered seasons and events. During 2021, the ongoing COVID-19 pandemic continued to accelerate the shift of TV viewing away from traditional pay TV to streaming TV and the on-going shift of advertising budgets away from traditional linear TV into streaming offering. While in 2021 we experienced an increase in TV streaming and our overall business was largely unaffected by the COVID-19 pandemic there can be no assurance that these positive trends will continue during the remainder of 2022 and beyond. Merger with fuboTV Sub On April 1, 2020, fuboTV Acquisition Corp., a Delaware corporation and our wholly-owned subsidiary (“Merger Sub”) merged with and into fuboTV Sub, whereby fuboTV Sub continued as the surviving corporation and became our wholly-owned subsidiary pursuant to the terms of the Agreement and Plan of Merger and Reorganization dated as of March 19, 2020, by and among us, Merger Sub and fuboTV Sub (the “Merger Agreement”). Following the Merger, we changed our name from “FaceBank Group, Inc.” to “fuboTV Inc.,” and we changed the name of fuboTV Sub to “fuboTV Media, Inc.” The combined company operates under the name “fuboTV,” and our trading symbol is “FUBO.” 50 In accordance with the terms of the Merger Agreement, at the effective time of the Merger, all of the capital stock of fuboTV Sub was converted into the right to receive shares of our newly created class of Series AA convertible preferred stock, par value $0.0001 per share (the “Series AA Preferred Stock”). Each share of Series AA Preferred Stock was entitled to 0.8 votes per share and was convertible into two (2) shares of our common stock following the sale of such share of Series AA Preferred Stock on an arms’-length basis either pursuant to Rule 144 under the Securities Act or pursuant to an effective registration statement under the Securities Act. In January and February 2021, 9,807,367 shares of Series AA Preferred Stock converted into 19,614,734 shares of common stock. On March 1, 2021, we consummated an offer to exchange the remaining outstanding shares of Series AA Preferred Stock for two shares of our common stock per share of Series AA Preferred Stock (the “Exchange Offer”). As a result of the Exchange Offer, 13,412,246 shares of Series AA Preferred Stock, representing 100% of the outstanding shares of Series AA Preferred Stock, were exchanged for 26,824,492 shares of our common stock. Unless otherwise stated, 2020 financial statements and metrics include FaceBank Pre-Merger from January 1, 2020 through March 31, 2020. Nature of Business The Company is a leading live TV streaming platform for sports, news, and entertainment. The Company’s revenues are almost entirely derived from the sale of subscription services and the sale of advertisements in the United States, though the Company has started to expand into international markets, with operations in Canada, Spain and France. Our subscription-based services are offered to consumers who can sign-up for accounts at https://fubo.tv, through which we provide basic plans with the flexibility for consumers to purchase the add-ons and features best suited for them. Besides the website, consumers can also sign-up via some TV-connected devices. Our platform provides, what we believe to be, a superior viewer experience, with a broad suite of unique features and personalization capabilities such as multi-channel viewing capabilities, favorites lists and a dynamic recommendation engine as well as 4K streaming and Cloud DVR offerings. We launched a business-to-consumer online mobile sportsbook (“Fubo Sportsbook”) in the states of Iowa and Arizona in the fourth quarter of 2021. We are planning to launch in additional states during 2022, subject to obtaining requisite regulatory approvals. During the year ended December 31, 2021, we entered into market access agreements with third parties in various states and paid $44.2 million under those market access agreements. See Note 8 in the accompanying consolidated financial statements. Seasonality We generate significantly higher levels of revenue and subscriber additions in the third and fourth quarters of the year. This seasonality is driven primarily by sports leagues, specifically the National Football League, which has a shorter partial-year season. In addition, we typically see subscribers on our platform decline from the fourth quarter of the previous year through the first and second quarter of the following year. We anticipate similar trends and user behavior for our recently launched Fubo Sportsbook given the seasonal nature of sports. We anticipate similar trends and user behavior for our recently launched Fubo Sportsbook given the seasonal nature of sports as described above. Segments Prior to the third quarter of 2021, we operated our business and reported our results through a single reportable segment. As a result of the launch of our online wagering business, we began to operate our business and report our results through two operating and reportable segments: streaming and online wagering. These segments are components of the Company for which separate discrete financial information is available to and evaluated regularly by the chief operating decision maker. Revenue and adjusted operating expenses are the metrics reported to the Company’s chief operating decision maker for purposes of making decisions about allocation of resources to, and assessing performance of, each reportable segment. Adjusted operating expenses is calculated as operating expenses, excluding stock-based compensation expense. Components of Results of Operations Revenues Subscription Subscription revenue consists primarily of subscription plans sold through the Company’s website and third-party app stores. Advertising Advertising revenue consists primarily of fees charged to advertisers who want to display ads (“impressions”) within the streamed content. 51 Software licenses, net Software license revenue consists of revenue generated from the sale of software licenses at one of our former subsidiaries, Nexway eCommerce Solutions. As a result of the deconsolidation of Nexway AG, which was effective as of March 31, 2020, the Company no longer generates revenue from software licenses. Other Other revenue consists of a contract to sub-license rights to broadcast certain international sporting events to a third party. Subscriber Related Expenses Subscriber related expenses consist primarily of affiliate distribution rights and other distribution costs related to content streaming. Broadcasting and Transmission Broadcasting and transmission expenses consist primarily of the cost to acquire a signal, transcode, store, and retransmit it to the subscribers. Sales and Marketing Sales and marketing expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation, agency costs, advertising campaigns and branding initiatives. Technology and Development Technology and development expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation, technical services, software expenses, and hosting expenses. General and Administrative General and administrative expenses consist primarily of payroll and related costs, benefits, rent and utilities, stock-based compensation, corporate insurance, office expenses, professional fees, as well as travel, meals, and entertainment costs. Depreciation and amortization Depreciation and amortization expense includes depreciation of fixed assets and amortization of finite-lived intangible assets. Other income (expense) Other income (expense) primarily consists of issuance gains/losses and the change in fair value of financial instruments, interest expense and financing costs on our outstanding borrowings and the loss recorded on the deconsolidation of a subsidiary. Income tax benefit The income tax benefit is driven by the change in deferred tax assets and liabilities and resulting change in valuation allowance. Results of Operations for the years ended December 31, 2021 and 2020 (in thousands): On August 15, 2019 and September 16, 2019, the Company acquired Facebank AG and Nexway, respectively and on April 1, 2020 the Company acquired fuboTV Pre-Merger. The results of our operations for the year ended December 31, 2020 includes the results of operations of Facebank AG and Nexway, which were disposed of in July 2020. Because of this, certain of our results of operations for the year ended December 31, 2021 are not comparable to the results of operations for the year ended December 31, 2020. 52 For the Years Ended December 31, 2021 2020 Revenues Subscriptions $ 564,441 $ 184,328 Advertising 73,749 24,904 Software licenses, net - 7,295 Other 160 1,219 Total revenues $ 638,350 $ 217,746 Operating expenses Subscriber related expenses $ 593,241 $ 204,240 Broadcasting and transmission 55,563 29,542 Sales and marketing 142,387 63,141 Technology and development 60,513 30,189 General and administrative 108,185 77,635 Depreciation and amortization 37,881 43,972 Impairment of intangible assets and goodwill - 248,926 Total operating expenses 997,770 697,645 Operating loss $ (359,420 ) $ (479,899 ) Other income (expense) Interest expense and financing costs $ (13,485 ) $ (18,637 ) Amortization of debt discount (14,928 ) - Gain on sale of assets - 7,631 Loss on extinguishment of debt (380 ) (24,521 ) Loss on deconsolidation of Nexway - (11,919 ) Change in fair value of warrant liabilities 2,659 (83,338 ) Change in fair value of shares settled liability - (1,665 ) Change in fair value of derivative liability - (426 ) Change in fair value of profit share liability - 1,971 Unrealized gain on equity method investment - 2,614 Foreign currency exchange loss - (1,010 ) Other income (90 ) 147 Total other expense $ (26,224 ) $ (129,153 ) Loss before income taxes $ (385,644 ) $ (609,052 ) Income tax benefit 2,681 9,660 Net loss $ (382,963 ) $ (599,392 ) Revenue, net During the year ended December 31, 2021, we recognized revenues of $638.4 million, primarily consisting of $564.4 million of subscription revenue, $73.7 million of advertising revenue and $0.2 million in other revenue. During the year ended December 31, 2020, we recognized revenues of $217.7 million primarily consisting of $184.3 million of subscription revenue, $24.9 million of advertising revenue, $7.3 million related to the sale of software licenses from our subsidiary Facebank AG and $1.2 million of other revenue. We sold Facebank AG in July 2020. The increase of $420.6 million was primarily due to a full year of revenue in 2021 of fuboTV compared to nine months in the prior year period, higher subscription revenue due to increases in our subscriber base and subscription package prices and an increase in advertising revenue resulting from an increase in the number of impressions sold. 53 Subscriber related expenses During the year ended December 31, 2021, we recognized subscriber related expenses of $593.2 million compared to $204.2 million during the year ended December 31, 2020. The increase of $389.0 million was primarily due to a full year of expenses in 2021 of fuboTV compared to nine months in the prior year period and an increase in affiliate distribution rights and other distribution costs resulting from an increase in subscribers. Broadcasting and transmission During the year ended December 31, 2021, we recognized broadcasting and transmission expenses of $55.6 million compared to $29.5 million during the year ended December 31, 2020. The increase of $26.1 million was primarily due to a full year of expenses in 2021 of fuboTV compared to nine months in the prior year period and higher number of linear feeds due to additional channel launches. Sales and marketing During the year ended December 31, 2021, we recognized sales and marketing expenses of $142.4 million compared to $63.1 million during the year ended December 31, 2020. The increase of $79.3 million was primarily due to a full year of expenses in 2021 of fuboTV compared to nine months in the prior year period and increased marketing expenses incurred to acquire new customers to our streaming platform. Technology and development During the year ended December 31, 2021, we recognized technology and development expenses of $60.5 million compared to $30.2 million during the year ended December 31, 2020. The increase of $30.3 million was primarily due to a full year of expenses in 2021 of fuboTV compared to nine months in the prior year period, an increase of $16.9 million in salaries due to an increase in employee headcount, $8.6 million in stock-based compensation and $4.8 million in costs related to the launch of our online wagering operations. General and Administrative During the year ended December 31, 2021, general and administrative expenses totaled $108.2 million compared to $77.6 million for the year ended December 31, 2020. The increase of $30.6 million was primarily due to a full year of expenses in 2021 of fuboTV compared to nine months in the prior year period, a $5.2 million increase in sales tax reserves, a $1.3 million increase in stock-based compensation, $9.0 million related to the launch of our online wagering operations, a $6.2 million increase in professional fees and a $3.4 million increase related to business insurance, and $5.0 million increase in salaries due to an increase in employee headcount. Depreciation and amortization During the year ended December 31, 2021, we recognized depreciation and amortization expenses of $37.9 million compared to $44.0 million during the year ended December 31, 2020. The decrease of $6.1 million is primarily related to a reduction of $16.4 million of amortization expense related to intangible assets of FaceBank Pre-Merger that were subject to impairment charges in the third and fourth quarters of 2020, offset in part by a full year of expenses in 2021 compared to nine months in the prior year period. Impairment of intangible assets and goodwill During the year ended December 31, 2020, we recognized an impairment of Facebank Pre-Merger intangible assets and goodwill of $248.9 million. Other Income (Expense) During the year ended December 31, 2021, we recognized $26.2 million of other expense (net), compared to $129.2 million of other expense (net) during the year ended December 31, 2020. The decrease of $102.9 million is primarily related to an $86.0 million reduction in the change in fair value of warrant liabilities, a $24.1 million decrease in loss on extinguishment of debt, an $11.9 million reduction in loss on deconsolidation of Nexway during 2020 and a $5.2 million reduction of interest expense, partially offset by an increase of $14.9 million in amortization of debt discount, $7.6 million gain on the sale of the Facebank AG and Nexway assets during 2020 and $2.6 million unrealized gain on our equity method investment in Nexway in 2020. Facebank AG and Nexway were sold in July 2020. 54 Income tax benefit During the year ended December 31, 2021, we recognized an income tax benefit of $2.7 million compared to $9.7 million during the year ended December 31, 2020. The decrease of $7.0 million in the income tax benefit is primarily due to our inability to fully recognize the future tax benefits on current year losses. Results of Operations for the years ended December 31, 2020 and 2019 (in thousands): On August 15, 2019, the Company acquired 100% of the capital stock of Facebank AG. On September 16, 2019, the Company acquired approximately 51% of the stock of Nexway. On April 1, 2020, the Company merged with fuboTV Pre-Merger. The results of our operations for the year ended December 31, 2020 include the results of operations of Facebank AG and Nexway and also include the effects of the deconsolidation of Nexway as of March 31, 2020 and the sale of Facebank AG in the three months ended September 30, 2020. The results of our operations for the year ended December 31, 2020 also include the results of operations of fuboTV post-Merger from April 1, 2020. Because of this, the results of operations for the years ended December 31, 2020 and 2019 are not comparable. For the Years Ended December 31, 2020 2019 Revenues Subscriptions $ 184,328 $ - Advertisements 24,904 - Software licenses, net 7,295 4,271 Other 1,219 - Total revenues 217,746 4,271 Operating expenses Subscriber related expenses 204,240 - Broadcasting and transmission 29,542 - Sales and marketing 63,141 491 Technology and development 30,189 - General and administrative 77,635 13,302 Depreciation and amortization 43,972 20,765 Impairment of intangible assets and goodwill 248,926 8,598 Total operating expenses 697,645 43,156 Operating loss (479,899 ) (38,885 ) Other income (expense) Interest expense and financing costs (18,637 ) (2,062 ) Loss on extinguishment of debt (24,521 ) - Gain on sale of assets 7,631 - Loss on investments - (8,281 ) Unrealized gain in equity method investment 2,614 - Loss on deconsolidation of Nexway (11,919 ) - Change in fair value of warrant liabilities (83,338 ) - Change in fair value of subsidiary warrant liabilities - 4,504 Change in fair value of shares settled liability (1,665 ) - Change in fair value of derivative liability (426 ) 815 Change in fair value of profit share liability 1,971 (198 ) Foreign currency exchange loss (1,010 ) (18 ) Other income 147 726 Total other expense (129,153 ) (4,514 ) Loss before income taxes (609,052 ) (43,399 ) Income tax benefit 9,660 5,272 Net loss $ (599,392 ) $ (38,127 ) 55 Revenue, net During the year ended December 31, 2020, we recognized revenues of $217.7 million, primarily related to $184.3 million of subscription revenue, $24.9 million of advertising revenue and $1.2 million in other revenue in connection with the second quarter acquisition of fuboTV Pre-Merger. These revenues were generated entirely by the fuboTV business, which we acquired through the Merger that closed on April 1, 2020, and there are no comparable results in the prior year. In addition, we generated $7.3 million related to the sale of software licenses from our acquisition Nexway. Subscriber related expenses During the year ended December 31, 2020, we recognized subscriber related expenses of $204.2 million due to affiliate distribution rights and other distribution costs in connection with the streaming revenue generated from the fuboTV business. There are no comparable results in the prior year. Broadcasting and transmission During the year ended December 31, 2020, we recognized broadcasting and transmission expenses of $29.5 million primarily related to transmissions of our services in connection with the streaming revenue generated from the fuboTV business. There are no comparable results in the prior year. Sales and marketing During the year ended December 31, 2020, we recognized sales and marketing expenses of $63.1 million as compared to $0.5 million during the year ended December 31, 2019. The increase in sales and marketing expense is primarily related to marketing expenses incurred to acquire new customers to the fuboTV streaming platform after the Merger on April 1, 2020. There are no comparable results in the prior year. Technology and development During the year ended December 31, 2020, we recognized technology and development expenses of $30.2 million in connection with the development of our streaming platform after the Merger on April 1, 2020. There were no technology and development expenses recognized during the year ended December 31, 2019. General and Administrative During the year ended December 31, 2020, general and administrative expenses totaled $77.6 million, compared to $13.3 million for the year ended December 31, 2019. The increase of $64.3 million was primarily related to $43.9 million of stock-based compensation, $16.7 million of incremental general and administrative expenses as a result of the acquisition of fuboTV Pre-Merger, $7.5 million in professional fees and $1.2 million in insurance partially offset by a reduction of $5.1 million of expenses related to Facebank AG and Nexway, which was sold during 2020. Depreciation and amortization During the year ended December 31, 2020, we recognized depreciation and amortization expenses of $44.0 million compared to $20.8 million during the year ended December 31, 2019. The increase of $23.2 million is primarily related to $27.2 million of amortization expense recorded for the intangible assets acquired in connection with the Merger on April 1, 2020 offset by a reduction of amortization expense of $4.5 million resulting from the impairment of legacy Facebank intangible assets recorded during 2020. Impairment of intangible assets and goodwill During the year ended December 31, 2020, we recognized an impairment of Facebank Pre-Merger intangible assets and goodwill of $248.9 million. During the year ended December 31, 2019, we recognized an impairment of intangible assets of Nexway of $8.6 million. Other Income (Expense) During the year ended December 31, 2020, we recognized $129.2 million of other expense (net), compared to $4.5 million during the year ended December 31, 2019. The increase of $124.6 million was primarily related to an increase of $83.3 million change in fair value of warrant liabilities, $16.6 million of interest expense on our outstanding borrowings, $24.5 million loss on extinguishment of debt, $11.9 million loss on the deconsolidation of Nexway, $4.5 million change in fair value of subsidiary warrants, $1.7 million change in fair value of change in shares settled liability, $1.2 million change in fair value of derivative liabilities, and $1.0 million increase in foreign currency exchange loss. These expenses were partially offset by a $8.3 million loss on investment recorded during 2019, $7.6 million gain on the sale of the Facebank AG and Nexway assets, $2.2 million change in fair value of profit share liability and $2.6 million unrealized gain on our equity method investment in Nexway. 56 Income tax benefit During the year ended December 31, 2020, we recognized an income tax benefit of $9.7 million compared to $5.3 million during the year ended December 31, 2019. The increase is due to an increase in deferred tax assets primarily resulting from the merger. Key Metrics & Non-GAAP Measures Unless otherwise stated, 2020 metrics below represent fuboTV Pre-Merger plus FaceBank pre-merger less Facebank AG and Nexway, businesses sold in July 2020 (“Pro-forma fuboTV Pre-Merger”). Certain measures used in this Annual Report, including Average Revenue Per User (“ARPU”), Average Cost Per User (“ACPU”) and Adjusted Contribution Margin (“ACM”) are non-GAAP financial measures. We believe ARPU, ACPU and Adjusted Contribution Margin are useful financial measures for investors as they are supplemental measures used by management in evaluating our core operating performance. Our non-GAAP financial measures have limitations as analytical tools, and you should not consider them in isolation or as a substitute for an analysis of our results under GAAP. There are a number of limitations related to the use of these non-GAAP financial measures versus their nearest GAAP equivalents. First, these non-GAAP financial measures are not a substitute for GAAP revenue. Second, these non-GAAP financial measures may not provide information directly comparable to measures provided by other companies in our industry, as those other companies may calculate their non-GAAP financial measures differently. Paid Subscribers We believe the number of paid subscribers is a relevant measure to gauge the size of our user base. Paid subscribers are total subscribers that have completed registration with fuboTV, have activated a payment method (only reflects one paying user per plan), from which fuboTV has collected payment in the month ending the relevant period. Users who are on a free (trial) period are not included in this metric. We had 1,129,807 (excluding the impact of the acquisition of Molotov) and 547,880 paid subscribers as of December 31, 2021 and 2020, respectively. Content Hours We believe the number of Content Hours streamed on our platform is a relevant measure to gauge user engagement. Content Hours is defined as the sum of total hours of content watched on the fuboTV platform for a given period. We had 1,160.8 million and 544.9 million Content Hours streamed in the years ended December 31, 2021 and 2020, respectively. Non-GAAP Monthly Average Revenue Per User (“ARPU”) We believe Non-GAAP Monthly Average Revenue Per User (“ARPU”) is a relevant measure to gauge the revenue received per subscriber on a monthly basis. ARPU is defined as total subscriber revenue collected in the period, also known as Platform Bookings (subscriber and advertising revenues excluding other revenues) divided by the average daily paid subscribers in such period divided by the number of months in the period. Our ARPU was $72.70 and $62.84 for the years ended December 31, 2021 and 2020, respectively. Non-GAAP Monthly Average Cost Per User (“ACPU”) We believe Non-GAAP Monthly Average Cost Per User (“ACPU”) is a relevant measure to gauge our variable expenses per subscriber. ACPU reflects Variable COGS per user, defined as subscriber related expenses less minimum guarantees expensed, payment processing for deferred revenue, In App Billing fees for deferred revenue and other subscriber related expenses in a given period, divided by the average daily subscribers in the period, divided by the number of months in the period. Our ACPU was $65.62 and $56.48 for the years ended December 31, 2021 and 2020, respectively. 57 Non-GAAP Adjusted Contribution Margin (ACM) We believe Non-GAAP Adjusted Contribution Margin (ACM) is a relevant metric to gauge our per-subscriber profitability. ACM is calculated by subtracting ACPU from ARPU and dividing the result by ARPU. Our ACM was 9.8% and 10.1% for the years ended December 31, 2021 and 2020, respectively. Reconciliation of Certain GAAP to Non-GAAP Metrics Reconciliation of Revenue to Non-GAAP Platform Bookings and Reconciliation of Subscriber Related Expenses to Non-GAAP Variable COGS and Adjusted Contribution Margin (in thousands except average subscriber and average per user amounts) Years Ended December 31, 2021 December 31, 2020 December 31, 2019 As-Reported Pro-forma Combined fubo Pre-Merger and Facebank Pre-Merger excluding Facebank AG and excluding Nexway Pro-forma Combined fubo Pre-Merger and Facebank Pre-Merger excluding Facebank AG and excluding Nexway Revenue (GAAP) $ 638,350 $ 261,498 $ 146,530 Add (Subtract): Other Revenue (1,418 ) (1,756 ) (777 ) Prior period subscriber deferred revenue (17,345 ) (9,377 ) (4,228 ) Current period subscriber deferred revenue 43,734 17,345 9,377 Non-GAAP Platform Bookings 663,321 267,710 150,902 Divide: Average Subscribers 760,298 355,010 234,064 Months in Period 12 12 12 Non-GAAP Monthly Average Revenue per User (Monthly ARPU) $ 72.70 $ 62.84 $ 53.73 Subscriber Related Expenses (GAAP) 593,241 262,240 201,448 Add (Subtract): Payment Processing for Deferred Revenue (current period) 121 40 206 In-App Billing Fees for Deferred Revenue (current period) 13 274 53 Minimum Guarantees and Content Credits 13,280 (18,211 ) (43,931 ) Payment Processing for Deferred Revenue (prior period) 296 162 - In-App Billing Fees for Deferred Revenue (prior period) 114 46 (98 ) Other Subscriber Related Expenses (8,365 ) (3,929 ) (2,151 ) Non-GAAP Variable COGS 598,700 240,622 155,527 Divide: Average Subscribers 760,298 355,010 234,064 Months in Period 12 12 12 Non-GAAP Monthly Average Cost per User (Monthly ACPU) $ 65.62 $ 56.48 $ 55.37 Non-GAAP Monthly Average Revenue per User (Monthly ARPU) $ 72.70 $ 62.84 $ 53.73 Subtract: Non-GAAP Monthly Average Cost per User (Monthly ACPU) $ 65.62 $ 56.48 $ 55.37 Divide: Non-GAAP Monthly Average Revenue per User (Monthly ARPU) $ 72.70 $ 62.84 $ 53.73 Non-GAAP Adjusted Contribution Margin 9.7 % 10.1 % (3.1 %) Liquidity and Capital Resources The accompanying consolidated financial statements have been prepared assuming that we will continue as a going concern, which contemplates the continuity of operations, realization of assets, and liquidation of liabilities in the normal course of business. See Note 16 in the accompanying consolidated financial statements for a further discussion of our cash commitments and contractual obligations, including lease obligations, market access agreements and sponsorship agreements. Our primary sources of cash are receipts from subscribers and advertising revenue as well as proceeds from equity and debt financings. Our primary uses of cash are content and programming license fees, operating expenses, including payroll-related, marketing, technology and professional fees, and expenses related to the launch and operations of our wagering business. We successfully raised $389.4 million, net of offering expenses, through the sale of 3.25% senior convertible notes in February 2021. We currently have an effective shelf registration statement on Form S-3 (No. 333-258428) initially filed with the SEC on August 4, 2021, as amended (the “Form S-3”) under which we may offer from time to time in one or more offerings any combination of common and preferred stock, debt securities, warrants, purchase contracts and units of up to $750.0 million in the aggregate. As of December 31, 2021, we sold 5,338,607 shares of our common stock in at-the-market offerings pursuant to our shelf registration statement, resulting in net proceeds of approximately $140.6 million, after deducting agent commissions and issuance costs. As of December 31, 2021, we had cash and cash equivalents of $374.3 million. 58 We may be required to seek additional capital , including in the event we engage in repurchases of our debt or equity securities in the future. In the future, we expect to obtain financing or to further increase our capital resources by issuing additional shares of our capital stock or offering additional debt or other equity securities, including senior or subordinated notes, debt securities convertible into equity, or shares of preferred stock. Issuing additional shares of our capital stock, other equity securities, or additional securities convertible into equity may dilute the economic and voting rights of our existing stockholders, reduce the market price of our common stock, or both. Debt securities convertible into equity could be subject to adjustments in the conversion ratio pursuant to which certain events may increase the number of equity securities issuable upon conversion. Preferred stock, if issued, could have a preference with respect to liquidating distributions or a preference with respect to dividend payments that could limit our ability to pay dividends to the holders of our common stock. Our decision to issue securities in any future offering will depend on market conditions and other factors beyond our control, which may adversely affect the amount, timing, or nature of our future offerings. As a result, holders of our common stock bear the risk that our future offerings may reduce the market price of our common stock and dilute their percentage ownership. If we are unable to raise additional capital or generate cash flows necessary to expand our operations and invest in continued innovation, we may not be able to compete successfully, which would harm our business, operations, and financial condition. Our future capital requirements and the adequacy of our available funds will depend on many factors, including our ability to successfully attract and retain subscribers, develop new technologies that can compete in a rapidly changing market with many competitors and the need to enter into collaborations with other companies or acquire other companies or technologies to enhance or complement our product and service offerings. We believe our existing cash will provide us with the necessary liquidity to continue as a going concern for at least the next twelve months. In addition to the foregoing, based on our current assessment, we do not expect any material impact on our long-term development timeline and our liquidity due to the worldwide COVID-19 pandemic. However, we are continuing to assess the effect on its operations by monitoring the spread of COVID-19 and the actions implemented to combat the pandemic throughout the world. Given the daily evolution of the COVID-19 outbreak, including the spread of variants, and the global response to curb its spread, COVID-19 may affect our results of operations, financial condition, or liquidity. See Note 10 in the accompanying unaudited consolidated financial statements for further discussion regarding our outstanding indebtedness. Cash Flows (in thousands) Year Ended December 31, 2021 2020 Net cash (used in) operating activities $ (192,601 ) $ (149,018 ) Net cash (used in) investing activities (76,172 ) (1,457 ) Net cash provided by financing activities 511,958 279,072 Net increase in cash and cash equivalents $ 243,185 $ 128,597 Operating Activities For the year ended December 31, 2021, net cash used in operating activities was $191.6 million, which consisted of our net loss of $383.0 million, adjusted for non-cash movements of $114.0 million. The non-cash movements consist primarily of $38.0 million of depreciation and amortization expenses, $63.8 million of stock-based compensation, $14.9 million of amortization of debt discounts and $1.4 million amortization of right of use assets, partially offset by $2.7 million of change in fair value of warrant liability. Changes in operating assets and liabilities resulted in cash inflows of approximately $76.3 million, primarily due to a net increase in accounts payable, accrued expenses and other current and long-term liabilities of $75.6 million due to timing of payments and a net increase in deferred revenue of $26.1 million, partially offset by increases in accounts receivable of $15.1 million, prepaid expenses and other assets of $9.6 million and cash reserved for users of $0.6 million. 59 For the year ended December 31, 2020, net cash used in operating activities was $149.0 million, which consisted of our net loss of $599.4 million, adjusted for non-cash movements of $456.2 million. The non-cash movements included $248.9 impairment of Facebank Pre-Merger intangible assets and goodwill, $83.3 million change in fair value of warrants, $50.7 million of stock-based compensation, $44.0 million of depreciation and amortization expenses primarily related to intangible assets, $24.5 million loss on extinguishment of debt, $12.3 million of amortization of debt discounts, $8.6 million loss on deconsolidation of Nexway (net of cash), $1.7 million of change in fair value of shares settled liability and $1.0 million of loss on foreign currency exchange, partially offset by $9.7 million of deferred income tax benefit, $7.6 million gain on the sale of assets, $2.6 million of unrealized gain on investments and $2.0 million change in fair value of profit share liability. Changes in operating assets and liabilities resulted in cash outflows of approximately $5.8 million, primarily due to a net increase in accounts receivable, prepaid expenses and other current assets of $14.7 million, a decrease in accounts payable, due to related parties and lease liabilities of $40.5 million, and partially offset by an increase in accrued expenses of $40.8 million, and deferred revenue of $8.6 million. Investing Activities For the year ended December 31, 2021, net cash used in investing activities was $76.2 million, which primarily consisted of $5.1 million of capital expenditures, $22.9 million for acquisitions, $39.8 million for payments for market access and license fee deposits, and $8.4 million for gaming licenses, market access fees related to the launch of our online wagering operations, and capitalization of internally developed software and technology application. For the year ended December 31, 2020, net cash used in investing activities was $1.5 million, which consisted of a $10.0 million advance to fuboTV Pre-Merger, $0.6 million related to the sale of Nexway and $0.2 million in capital expenditures, offset by net cash received of $9.4 million from the acquisition of fuboTV Pre-Merger. Financing Activities For the year ended December 31, 2021, net cash provided by financing activities was $512.0 million. The net cash provided is primarily related to approximately $389.4 million of net proceeds received from the issuance of senior convertible notes, $140.4 million of net proceeds received from the “at-the market” offering and $6.8 million of proceeds received from the exercise of stock options and warrants. These proceeds were offset by repayments of $24.7 million of outstanding debt. For the year ended December 31, 2020, net cash provided by financing activities was $279.1 million. The net cash provided is primarily related to $278.9 million of proceeds received from the sale of our common stock, $33.6 million of proceeds received in connection with short-term and long-term borrowings, $3.9 million from the exercise of stock options and warrants and $3.0 million of proceeds received from the issuance of convertible notes. These proceeds were partially offset by repayments of $35.4 million of notes payable, repayment of $3.9 million of convertible notes, and $0.9 million in connection with the redemption of Series D preferred stock. Critical Accounting Policies Our discussion and analysis of financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these consolidated financial statements and related disclosures requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. We have identified all significant accounting policies in Note 3 to our consolidated financial statements in Part II, Item 8 of this Annual Report. Business Combinations We recognize, separately from goodwill, identifiable assets and liabilities acquired in a business combination at fair value on the date of acquisition. We use our best estimates and assumptions to accurately assign fair value to the tangible and identifiable intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those acquired intangible assets. We estimate the useful lives of the intangible assets based on the expected period over which we anticipate generating economic benefit from the asset. The determination of the fair value of acquired identifiable intangible assets requires us to make significant estimates and assumptions regarding projected revenue and growth rates, royalty rates, and discount rates. Unanticipated events and circumstances may occur that may affect the accuracy or validity of such assumptions, estimates or actual results. We also review our intangible assets for impairment whenever changes in circumstances indicate that the carrying amount of an asset is not recoverable. 60 In accounting for the Merger described in Note 4 to our consolidated financial statements in Part II, Item 8 of this Annual Report, judgment was required in determining the accounting acquirer. Our evaluation of the accounting acquirer considered various indicators including voting rights, minority voting interest, composition of board of directors, composition of management and relative size of the entities. We ultimately concluded that Facebank Pre-Merger was the accounting acquirer in the Merger because (i) FaceBank Pre-Merger’s stockholders owned approximately 57% of the voting common shares of the combined company immediately following the closing of the Merger (54% assuming the exercise of all vested stock options as of the closing of the transaction) and (ii) directors appointed by FaceBank Pre-Merger would hold a majority of board seats in the combined company. Goodwill We test goodwill for impairment on an annual basis during the fourth quarter of each calendar year or earlier when circumstances dictate. We measure recoverability of goodwill at the reporting unit level. The process of determining the fair value of a reporting unit is highly subjective and involves the use of significant estimates and assumptions. In performing our annual assessment, we can opt to perform a qualitative assessment to test a reporting unit’s goodwill for impairment or we can directly perform a quantitative assessment. Based on our qualitative assessment, if we determine that the fair value of our reporting unit is, more likely than not, less than its carrying amount, then the quantitative assessment is performed. Any excess of the reporting unit’s carrying amount over its fair value will be recorded as an impairment loss. During the third quarter of 2020, we identified a triggering event related to our Facebank reporting unit that required us to perform a quantitative assessment. We concluded that the fair value of the reporting unit was less than its carrying value and we recognized an impairment charge of $148.1 million in third quarter of 2020. The impairment charge was primarily related to the departure of the former executive of the Facebank business and our shift in focus to the fuboTV business. We performed our annual impairment test in the fourth quarter of 2021 and concluded that no additional impairment charges were necessary. Intangible Assets We identify intangible assets acquired in a business combination and determine their fair value. The determination involves certain judgments and estimates. We amortize purchased-intangible assets on a straight-line basis over the estimated useful life of the assets. We review purchased-intangible assets whenever events or changes in circumstances indicate that the useful life is shorter than we had originally estimated or that the carrying amount of assets may not be recoverable. If such facts and circumstances indicate an asset’s carrying amount may not be recoverable, we assess the recoverability of purchased-intangible assets by comparing the projected undiscounted net cash flows associated with the asset group against their respective carrying amounts. Impairment, if any, is based on the excess of the carrying amount over the fair value of these asset groups. If the useful life of the asset is shorter than originally estimated, we accelerate the rate of amortization and amortize the remaining carrying value over the new shorter useful life During the third and fourth quarters of 2020, we identified triggering events related to our Facebank intangible assets that required us to perform a quantitative assessment. We concluded that the fair value of the intangible assets was less than its carrying value and we recognized impairment charges of $100.3 million related to the legacy Facebank intangible assets. There were no triggering events during 2021. Stock Compensation We recognize stock-based compensation for stock-based awards (including stock options, restricted stock units, and restricted stock awards) in accordance with ASC No. 718, Compensation – Stock Compensation (“ASC 718”). Determining the appropriate fair value of stock-based awards requires numerous assumptions, some of which are highly complex and subjective. Stock-based awards generally vest subject to the satisfaction of service requirements, or the satisfaction of both service requirements and achievement of certain performance conditions or market and service conditions. For stock-based awards that vest subject to the satisfaction of service requirements or market and service conditions, stock-based compensation is measured based on the fair value of the award on the date of grant and is recognized as stock-based compensation on a straight-line basis over the requisite service period. For stock-based awards that have a performance component, stock-based compensation is measured based on the fair value on the grant date and is recognized over the requisite service period as achievement of the performance objective becomes probable We estimate the fair value of our stock option awards on the grant date using the Black-Scholes option-pricing model. The Black-Scholes option-pricing model requires the use of judgments and assumptions, including fair value of our common stock, the option’s expected term, the expected price volatility of the underlying stock, risk free interest rates and the expected dividend yield. The fair value of our restricted stock units and restricted stock awards is estimated on the date of grant based on the fair value of our common stock. The Black-Scholes model assumptions are further described below: ● Common stock – the fair value of the Company’s common stock. ● Expected Term - The expected term of options represents the period that the Company’s stock-based awards are expected to be outstanding based on the simplified method, which is the half-life from vesting to the end of its contractual term. The simplified method was used because the Company does not have sufficient historical exercise data to provide a reasonable basis for an estimate of expected term. ● Expected Volatility – The Company historically has lacked sufficient company specific historical and implied volatility information. Therefore, it estimates its expected stock volatility based primarily on the historical volatility of a publicly traded set of peer companies with consideration of the volatility of its own traded stock price. ● Risk-Free Interest Rate - The Company bases the risk-free interest rate on the implied yield available on U.S. Treasury zero-coupon issues with an equivalent remaining term. ● Expected Dividend - The Company has never declared or paid any cash dividends on its common shares and does not plan to pay cash dividends in the foreseeable future, and, therefore, uses an expected dividend yield of zero in its valuation models. The following assumptions were used in determining the fair value of stock options granted during the years ended December 31, 2021 and 2020: Years ended December 31 2021 2020 Dividend yield - % - % Expected price volatility 44.8% - 45.2 % 44.4%-57.3 % Risk free interest rate 0.6% - 1.1 % 0.23%-0.58 % Expected term (years) 5.8 - 6.1 years 5.3 - 7.5 years If any of the assumptions used in the Black-Scholes option-pricing model change significantly, stock-based compensation for future awards may differ materially compared with the previously granted awards. We estimate the fair value of our market and service condition stock option awards on the grant date using a Monte Carlo simulation model. The Monte Carlo simulation incorporates into the valuation the possibility that the stock price goals may not be satisfied. One of the most judgmental assumptions in the Monte Carlo simulation is the estimated fair value of the common stock underlying the award. If the stock price goals are met sooner than the derived service period, we will adjust our stock-based compensation expense to reflect the cumulative expense associated with the vested award. We will recognize stock-based compensation expense over the requisite service period, regardless of whether the stock price goals are achieved. The following assumptions were used in determining the fair value of stock options granted during the years ended December 31, 2021 and 2020 in the Monte Carlo simulation model: For the years ended December 31, 2021 2020 Dividend yield - - Expected volatility 71.5 % 76.0%-88.1 %  Risk free rate 1.3 % 0.24%-0.30 % Derived service period 2.0 years 1.6- 1.9 years We account for forfeitures as they occur. 61 Recently Issued Accounting Pronouncements See Note 3 to our consolidated financial statements in Part II, Item 8 of this Annual Report for a discussion of recent accounting policies. Item 7A. Quantitative and Qualitative Disclosures About Market Risk. Not required pursuant to the scaled disclosure requirements available to smaller reporting companies.