It's a tough macroeconomic environment -- particularly for tech companies that went into this inflationary period with debt and losses. Sports-first streaming platform fuboTV (FUBO +0.00%) is one of these companies. As is shown by the growth stock's 80% slide this year, investors have apparently decided that the stock is riskier than they had thought.
But fuboTV has some plans to help kick its path to profitability into overdrive, including a strategic review of its new wagering business: Fubo Sportsbook.
NYSE: FUBO
Key Data Points
Big losses
Highlighting why investors are likely uneasy about fuboTV in this market, the company reported a net loss of about $116 million in the second quarter of 2022. That's an incredible sum considering that total revenue for the period was just $222 million. Of course, management would point out the company's improving operating leverage; as revenue increased 70% year over year, fuboTV's net loss as a percentage of revenue improved by more than 2,000 basis points.
Particularly worrisome is the streaming service's operating cash flow. fuboTV operating cash flow during Q2 was negative $91.3 million. That's some serious cash burn when held up next to the company's cash position of about $379 million.
Profits may be years away
Given the market's growing appetite for profits, and considering the rising cost of capital, fuboTV says it plans to "refine and adjust our business to reflect the changes in today's macroeconomic environment." These changes, management says, will eventually lead to profitability.
But investors will need to have some patience. fuboTV's timeframe for positive free cash flow? 2025.
Its plans to move closer to positive free cash flow include reducing internal costs, disciplined management of content costs in an effort to improve unit economics, and the consideration of strategic opportunities for its wagering business, where the company has a live app in Arizona and Iowa allowing users to sync live sports viewing and wagering in one integrated ecosystem.
While it's unclear what fuboTV hopes to do with Fubo Sportsbook, management made one thing clear in its second-quarter shareholder letter: The overarching goal is to "de-risk" the business. It said:
While our disciplined sportsbook progress continues, in light of a rapidly evolving macro-economic environment, we believe it is important to be even more capital efficient than originally scoped. We are taking steps to de-risk our business and have made the decision to no longer go down the wagering path independently. As a result, we're evaluating strategic opportunities for our wagering business.
Whatever fuboTV is able to do with its wagering business to help mitigate risk, investors should keep in mind two things. First, management's plans to prioritize profits will likely take years to generate a meaningful result.
On a more positive note, fuboTV does have one thing going very well for it: The popularity of streaming -- particularly streaming of live sports -- is surging. That's evident by the company's 41% year-over-year increase in subscribers during the quarter and its 32% jump in ad revenue over the same period.
For fuboTV shareholders, rapid growth rates like these will hopefully be enough to help the company continue attracting enough capital to fund its business while it works toward becoming self-funding (able to fund its growth plans from its own cash from operations).
