As a streaming replacement of a traditional cable TV subscription, fuboTV (FUBO 0.72%) has been in the right place at the right time, benefiting from the tailwind of changing consumer viewing preferences. When the company reported fourth-quarter and full-year 2021 earnings last week, it noted rapidly growing subscribers and revenue.
But there was one particular sign of concern in the earnings report that could give potential investors in this streaming platform pause -- a significantly unprofitable bottom line. Let's take a closer look at this latest earnings report and see if the company has what it takes to overcome this disappointing metric.
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fuboTV is improving customer value
Impressively, fuboTV added 185,000 subscribers in the fourth quarter (ended Dec. 31), lifting its total to 1.13 million. That subscriber jump was nearly double the growth of 93,000 in the same period in 2020. The accelerating growth should put to rest the theory that fuboTV is primarily a stay-at-home stock that will thrive during the pandemic but struggle in its aftermath.
Rising subscriber totals in Q4 fueled revenue growth of 120% year over year to reach $231 million. In addition to adding customers, fuboTV is earning more per customer. The average revenue per user rose to $74.52 in Q4 2021, up from $69.19 in Q4 2020 and $59.14 in Q4 2019. It's an excellent sign for shareholders that fuboTV is accelerating subscriber growth and raising prices simultaneously.
The bad news? fuboTV lost $112 million on the bottom line in Q4. That said, it was an improvement from the loss of $195 million in Q4 2020. The bulk of fuboTV's expenses are subscriber-related. fuboTV must pay carriage fees to networks for the privilege of showing the networks' content to its customers. Herein lies the disappointing metric in Q4 -- subscriber-related expenses were negatively deleveraged.
From the fourth quarter of 2019 to the fourth quarter of 2020, fuboTV's subscriber-related expenses as a percentage of revenue dropped from 118.7% to 85.6%. That's what you like to see as a shareholder: Revenue grows, and costs grow more slowly, creating leverage and increasing profitability. However, from Q4 2020 to Q4 2021, subscriber-related expenses as a percentage of revenue increased from 85.6% to 93.5%. That raises concerns, particularly when revenue increased by 120%.
Management was asked about the reversal of this trend in the conference call that followed the fourth-quarter earnings release. CEO David Gandler responded by saying:
With respect to the SRE [subscriber-related expenses] line, what you're seeing is that we've added some regional sports networks. We've acquired some sports rights. Again, very light. We're getting ready to test some new things, and we want to better understand what the value proposition is for our customers and the impact on all of our key performance indicators.
In other words, fuboTV increased the amount of content it offered consumers. The deleveraging was likely a result of the content costing fuboTV more than the incremental increase in average revenue per user increase year over year.
What this could mean for fuboTV investors
The move essentially increases the customer value proposition; consumers are getting more bang for their buck with fuboTV. This can be a good thing if there is evidence of return on that investment, which there is with the near-doubling of total subscriber growth.
That said, it is easier to gain customers if you sell them products at prices so low they aren't enough to cover your costs. fuboTV's stock price is down 79.7% in the last year despite excellent growth in revenue and subscribers. To turn things around, fuboTV likely has to prove it can run the business sustainably.
