fuboTV Inc., the sports live TV streaming platform, will issue financial results for the fourth quarter and full year 2021 after the market closes on February 23, 2022.
The company is struggling to lower costs as a percentage of revenue, leading to massive losses on the bottom line. Will management be able to offer assurances that it is managing this aspect of the business when it reports later this week? Let's take a closer look at what investors might expect on Wednesday.
Preliminary Fourth Quarter 2021 Results
FUBO gave us an idea on where Q4 earnings will come in with the preliminary results released in January so there should be no big surprises.
fuboTV Inc. has announced preliminary fourth quarter 2021 results, including revenue and subscriber growth, ahead of its participation at this week’s24th Annual Needham Virtual Growth Conference. Both revenue and subscriber metrics are expected to exceed previously issued guidance resulting in a record quarter and year for fuboTV.
- Fourth quarter 2021 total revenue is expected to be between $215-$220 million, an increase of 105%-109% year-over-year. Prior guidance was $205-210 million for the quarter.
- Fourth quarter 2021 advertising revenue is expected to be over $25 million, an increase in excess of 90% year-over-year, and crossing an annual run rate of $100 million.
- Paid subscribers at year-end are expected to exceed 1,100,000, an increase of more than 100% year-over-year. Prior guidance was 1,060,000-1,070,000 subscribers at year-end.
- Subscriber Acquisition Cost (SAC) is expected to be at the low end of the company’s target range of 1.0-1.5x monthly Average Revenue Per User (ARPU) for the quarter.
- Subscriber churn is expected to improve in the quarter by more than 200 basis points year-over-year. This marks the 13th consecutive quarter of churn improvements.
- fuboTV expects to end the quarter with more than $375 million of cash, cash equivalents and restricted cash.
The metrics above exclude Molotov SAS, acquired by fuboTV in December 2021.
Factors to Consider
fuboTV’s strengthening sports streaming offerings are expected to have continued driving the top line in the to-be-reported quarter.
The company’s strengthening position in online sports wagering is likely to have aided the fourth-quarter performance.
fuboTV had previously received approval from the Iowa Racing and Gaming Commission (IRGC) to offer advance deposit online sports wagering in Iowa. During the fourth quarter, Fubo Gaming, a subsidiary of fuboTV, announced that it is live in the mobile sports betting market with the official launch of Fubo Sportsbook in Iowa.
Fubo Sportsbook, a subsidiary of fuboTV, entered into a partnership with NASCAR to become an Authorized Gaming Operator (AGO). Per the deal, fubo Sportsbook and NASCAR will work together to provide racing fans with a unique and engaging wagering experience.
Apart from these, rising advertising demand on the streaming platform along with the ability to stream on multiple devices, is expected to have aided the top line in the to-be-reported quarter.
The solid momentum of fuboTV’s sports-first live TV streaming platform is expected to have aided paid subscriber growth in the fourth quarter.
In third-quarter 2021, the company witnessed a 108% year-over-year growth in total paid subscribers, reaching 944,605. The trend is expected to have continued in the to-be-reported quarter.
Margin Improvement Needs to Accelerate
fuboTV CEO, David Gandler,appeared on CNBC to discuss FUBO's progress in 2021 shortly after the company release their preliminary Q4 results. The key comment comes towards the end of the interview near the 4:00 mark of the video I linked when asked about the path to profitability.
We have laid out a plan and that plan was to expand our contribution margin every quarter between 100 and 200 basis points. We have been delivering on that. This is not going to happen overnight. As I said, it takes decades for companies to deliver value, but we do have a glide path and will be talking about that glide path in our quarterly earnings in the next couple months.
Source: David Gandler - Interview with CNBC on 1/10/2022
It is true that FUBO has been meeting this goal. Most recently, they improved Adjusted Contribution Margin ("ACM") from 10.5% in 3Q20 to 12.4% in 3Q21.ACM was reported at 10.1% for 2020 so I am looking for them to report better than 14% for 2021 to keep with the minimum of a 100 basis point improvement per quarter.
Given that ACM is calculated by subtracting Average Cost Per User (ACPU) from Average Revenue Per User (ARPU), this is a metric shareholders should be tracking closely each quarter. It will ultimately tell us how quickly FUBO is working its way towards profitability. However, ACPU only accounts for what the company refers to as "Subscriber Related Expenses" and not all expense categories that would include G&A, Sales & Marketing, Technology, etc. In Q3, Subscriber Related Expenses accounted for 55% of all expenses so there is still ground to make up in the other expense categories as well.
ACM improvement has primarily benefited from the significant increases in ARPU experienced in the last year, but we should anticipate ARPU growth to slow as subscribership continues to mature. Using an average subscriber number of 1,022,500 for Q4 and indicated revenue up to $220 million, that would deliver an ARPU of $71.92 vs. $62.84 in 4Q2021. At a 14% increase year-over-year, FUBO would have to increase ARPU to $82 in 2022, all else constant. That is a tough stretch with the base subscription starting at $65/month.
As such, we should be looking for the company to continue to show improvement in driving down Expenses as a Percentage of Revenue which improved from a total of 207% in 3Q20 to 165.5% in 3Q21.
Analyst view
Oppenheimer analyst Jason Helfstein lowered the firm's price target on FuboTV to $16 from $42 and keeps an Outperform rating on the shares. The analyst highlights FuboTV's trending toward Q4 subscriber beat on strong NFL viewership, while tougher Q1 comps and management briefly tested quarterly signups. He believes new CFO will provide investors a road-map for profitability on investor day and 30% of total sportsbook registrations in AZ/IA have FuboTV.
LightShed Partners analyst Richard Greenfield upgraded FuboTV to Neutral from Sell following the stock's selloff. Fubo shares are down nearly 85% in 13 months while the company is sitting on $375M of cash, Greenfield tells investors in a research note. The analyst is taking a wait and see approach on whether management "abandons their sports betting 'fantasy' to reduce the cash burn in 2022 and beyond." While FuboTV shares "could very well be a zero" in the next 24 months," the company could also put itself up for sale, writes Greenfield.
LightShed Partners analyst Richard Greenfield upgraded FuboTV to Neutral from Sell and removed his $6.50 price target.
Needham analyst Laura Martin lowered the firm's price target on FuboTV to $15 from $60 but keeps a Buy rating on the shares. The analyst highlights broader concerns for names under her Streaming and AdTech coverage that drove multiple compression last year and in 2022-to-date, namely tougher comps, chip shortages, supply chain pressures, omicron variant slowing digital ad growth and rising interest rates, even though she views the first four as being "short lived and cyclical/temporary".
fuboTV's revenue in the fourth quarter of 2021 is expected to be $213.333 million, the adjusted net loss is expected to be $85.813 million, and the adjusted EPS is expected to lose us $0.61, according to Bloomberg's unanimous expectation.