IPO Preview: FaceBank Group Begins U.S. IPO Effort For fuboTV

IPOStreet

FaceBank Group (FUBO) intends to raise $100 million in an IPO of its common stock, according to an S-1 registration statement.

The firm offers a live streaming service, primarily featuring sporting events.

FUBO is growing rapidly but producing high operating losses in an industry which is expected to grow at a high rate in the years ahead.

New York, NY-based FaceBank / fuboTV was founded to offer a combination subscription and advertising revenue platform to stream mostly sports events to user devices such as SmartTVs, mobile phones and other computing devices.

In April 2020 FaceBank acquired fuboTV. Pre-acquisition in 2019, fuboTV generated a $54 monthly ARPU, an increase of 42 per cent over the previous year.

Management is headed by Chief Executive Officer Mr. David Gandler, who has been with the firm since April 2020 and was previously president and CEO of fuboTV and Vice President Ad Sales at DramaFever, a video streaming service.

Below is a brief summary video of a fuboTV consumer review:

Source: Home Theater Hobbyist

The company's primary offerings include:

  • Live television for sports events
  • Over 700 channel access to local TV
  • Other streaming providers such as Apple and Google

FaceBank / fuboTV has received at least $850 million from investors.

The company obtains subscribers by means of online marketing, providing a trial and seeking to convert them to paid status.

FuboTV with 316,000 paying subscribers closed 2019. Year-over-year, its advertising business grew by 201 percent and management says it's a 'key driver of our monetisation strategy.'

Sales & Marketing expenses as a percentage of total revenue fell as revenues grew.

In the most recent reporting period, the Sales & Marketing efficiency rate, defined as how many dollars of additional new revenues are generated by each dollar of Sales & Marketing expenditure, increased to 3.9x.

The firm has achieved increasing two-month retention rates over the past several years, as the chart shows below:

facebankretention

The global market for sports streaming was estimated at $11.3 billion in 2018 and is forecast to reach $34 billion in value by 2027, according to an Absolute Markets Insights 2020 market research report.

This represents a 14.56 per cent CAGR forecast between 2019 and 2027.

The main drivers for this expected growth are that younger demographic users prefer streaming services rather than traditional cable television, and increased mobile network speed and capacity.

Also, in the short term the recent Covid-19 pandemic has given streaming providers a boost.

Additionally, streaming service providers have also integrated newer technologies 'such as peer-to-peer commentary and...augmented reality.'

Major participants in the industry or other sectors include:

  • AT&T (T)
  • Comcast (CMCSA)
  • Cox (COX)
  • Altice (ATUS)
  • YouTube TV (GOOG)
  • Hulu Live (DIS)
  • Sling TV (DISH)

FaceBank / fuboTV's recent financial results can be summarized as follows:

  • Increasing topline revenue
  • Reduced operating losses and negative operating margin
  • Variable cash used in operations

Below are relevant financial results derived from the firm's registration statement:

facebankpl

Source: Company registration statement

As of March 31 , 2020, FaceBank / fuboTV had $8.1 million in cash and $372 million in total liabilities.

Free cash flow was negative during the 12 months ended March 31, 2020 ($98.6 million)

FaceBank / fuboTV intends to raise $100 in gross proceeds from its common stock IPO, although the final amount may vary.

The firm has the following type of stock structure:

We have three classes of authorized capital stock: common stock; Series AA convertible preferred stock; and Series D convertible preferred stock. We refer to the Series AA convertible preferred stock as the Series AA Preferred Stock and to the Series D convertible preferred stock as the Series D Preferred Stock. The rights of the holders of common stock and Series AA convertible preferred stock are identical, except for voting and conversion rights. Each share of common stock is entitled to one vote. Each share of Series AA convertible preferred stock is entitled to 0.8 votes and is convertible into two ( 2) shares of common stock upon an arms'-length transfer pursuant to Rule 144 under the Securities Act of 1933, as amended, or upon a registration of such shares by us. The holders of Series D convertible preferred stock are generally not entitled to vote and are eligible to convert into shares of common stock at the option of the holder on the six-month anniversary of issuance ...

The management says the net proceeds from the IPO will be used as follows:

... we currently intend to use the net proceeds of any offering of securities for working capital and general corporate purposes and for growing our live TV streaming platform .... We will not receive any proceeds from the sale of shares of common stock by the selling shareholder

The company roadshow presentation by the Management is not available.

Listed bookrunners of the IPO are Evercore ISI, BMO Capital Markets, Needham & Company, Oppenheimer & Co., Roth Capital Partners, and Wedbush Securities.

Commentary

FaceBank / fuboTV seeks capital from the public for its expansion initiatives.

Financials from the firm show accelerating growth in topline revenues, but still high operating losses and operating cash burn.

Sales & Marketing expenses have fallen as a percentage of total revenue; its efficiency in sales & marketing has increased. Both are positive signals of improving marketing efficiencies for the firm.

The market opportunity for live TV streaming in the sports vertical is large, and is expected to grow significantly over the medium term as younger demographics choose streaming solutions over traditional cable TV bundles.

Evercore ISI is the lead left underwriter and there is no data on IPOs led by the firm over the last 12-month period.

Fubo TV appears to be well positioned to take advantage of strong trends in the industry, but the firm will need substantial investment to cover operating losses as it seeks to become a major player against far larger and deep-pocketed industry competitors.

I’ll provide an update when we learn management’s pricing and valuation assumptions.

Expected IPO Pricing Date: To be announced.

Glossary Of Terms

(I have no position in any stocks mentioned as of the article date, no plans to initiate any positions within the next 48 hours, and no business relationship with any company whose stock is mentioned in this article. IPO stocks can be very volatile in the days immediately after an IPO. Information provided is for educational purposes only, may be in error, incomplete or out of date, and does not constitute financial, legal, or investment advice.)

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