Streaming service fuboTV (FUBO -3.57%) reported 2022 first-quarter earnings after the markets closed on May 5. The sports-centric alternative to cable generated explosive revenue growth as it benefits from the long-run trend of consumers switching to streaming.
Still, the market was not impressed, and the stock was down 20% on the day following the announcement. Let's look closer at the quarters' results and perhaps determine what upset investors.
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Delivering explosive revenue growth -- with a catch
In its first quarter, which ended March 31, fuboTV earned $242 million in revenue. That was up by a whopping 102% compared to the same quarter the year before. The company attracts folks who want a bundled experience similar to cable TV, except with the convenience of streaming. That's understandable, considering a streaming subscription can be taken anywhere consumers have a connected device and an internet connection.
FUBO Revenue (Quarterly) data by YCharts.
The advantages helped fuboTV reach over 1.3 million subscribers worldwide at the end of Q1. That was up from the roughly 730,000 it had at the same time the year prior. Despite the surging growth, fuboTV is still in the early stages of expansion. Streaming video-on-demand pioneer Netflix boasts over 222 million subscribers worldwide.
That said, explosive growth and a massive market opportunity are not what had fuboTV stock falling on the day after earnings. Instead, it was the huge losses on the bottom line that were worrying investors. fuboTV reported a net loss of $141 million in Q1 2022, more than double the loss of $70 million in Q1 2021. To make matters worse, the company is showing few signs of leverage on the expense side.
The most significant expenses for fuboTV are the fees it pays for content -- and these totaled 102% of revenue in Q1, up from 95% the year before. So despite revenue surging by 102%, subscriber-related expenses went up. Typically, investors like to see costs as a percentage of revenue come down as revenue goes up. That demonstrates economies of scale in the business and offers a path to greater profitability.
The stock is down 95% off its high
Mounting losses on the bottom line led fuboTV to lose $127 million in cash from operations in the first quarter. The company had to sell more equity to raise $204 million of cash to reinforce the balance sheet. Management noted it would work to moderate operating cash outflow for the rest of the year to assuage investor concerns over the losses.
FUBO Operating Income (Quarterly) data by YCharts.
The stock is down 95% off its high as the market has shunned unprofitable growth stocks. fuboTV will need to balance revenue and expenses to stem the bleeding. One solution could be price increases on the services it offers. That may lead to slower account growth and perhaps more significant customer churn, but putting the company on a more sustainable footing may be necessary.
