The Information broke some neat news earlier this week about The Athletic, the subscription sports media website that has raised lots of money and, per the report, spent lots of it.
While we have all become inured to a degree regarding losses at quickly growing, venture-backed companies, seeing a media business lose software-style money was eyebrow-raising. However, after a quick scan of the numbers, I have to wonder a bit. It kinda looks like The Athletic is doing fine?
Per Jessica Toonkel’s reporting, The Athletic burned $54 million in cash in 2019 against revenues of $26 million. That’s a lot of burn, right! Maybe? It depends whether the site was hiring lots of staff, building out its product and setting the groundwork for future revenue growth.
So, did the spend work out? Seems like it: The Athletic racked up $47 million in revenues and burned $41 million worth of cash in 2020, according to The Information, despite the pandemic kicking sports in the shins that year.
The company was still not close to profitable last year, but improving from a cash burn margin of greater than 200% of revenues to less than 100% is pretty good progress. (If that scale of red ink terrifies you, never, ever look at the P&L of early- and middle-stage software startups.)
This year, The Athletic expects its cash burn to fall further, to just $35 million, while its revenues scale to $77 million. For 2021, then, the company’s cash burn should make up less than half of its revenue in percentage terms. Again, not close to profitability, but certainly a huge improvement on prior totals and yet another year of improving operating results.
Next year, the company expects cash consumption of merely $7 million against $119 million in revenue. That seems just fucking fine?
A company doing nine figures of recurring subscription revenues is valuable, even if we presume that The Athletic has far lesser gross margins than your average software outfit. So, the company won’t manage a SaaS multiple but, unless I am missing something, The Athletic expects to be nearly cash neutral next year, the same 12-month period in which it expects to crest $100 million in top line, so … where is the crisis?
Unless we’re missing some key data point — basement-tier gross margins? Churn issues that we can’t spot from top-line expansion? Falling average revenue per subscriber? Huge cash expenses that are separate from our cash flow considerations? — the data seems perfectly OK? Did people think that it was going to be inexpensive to build a global sports website staffed with brilliant writers from lots of markets to cover lots of sports?
Of course not. And neither did The Athletic’s backers. I don’t get it.