Blogs -FuboTV Delivers Record Numbers; Fantasy and Sports Betting on Deck

FuboTV Delivers Record Numbers; Fantasy and Sports Betting on Deck


August 13, 2021

author

Beth Kindig

Lead Tech Analyst

According to Fubo’s recent earnings call, a free-to-play app is scheduled to launch in Q3 and a sports betting app is scheduled to launch in Q4. As we stated over the past two quarters, owning a live sports audience will convert for a lower customer acquisition cost and better lifetime value on both free-to-play fantasy and sports betting compared to the competing sports betting companies who must find media partners. Fubo management refers to this as a flywheel, and we agree there is substantial potential for a flywheel effect specifically due to the enthusiasm of sports fans.

Below, we review the company’s record-breaking audience growth, the much-debated gross margins, the likelihood that Fubo will have to raise money (and when this might occur), plus what we hope to see in Q3 from the company.

Perfect 10.000 on Audience Growth

We had made the point that short sellers were exploiting the one-time event of live sports being canceled last year. The results of a live sports comeback are seen clearly in Fubo’s results with 196% growth year-over-year in revenue to $130.9 million, beating analyst estimates by $9.46 million. Subscription revenue grew by 189% YoY to $114.4 million and advertising revenue grew by 281% YoY to $16.5 million.

The most important number was the sequential growth, as Fubo certainly had tailwinds from low Covid comps. In this case, sequential revenue grew QoQ by 9%. This is key because Q2 is a seasonally low quarter for sports. My first guess was that this was due to the NBA playoffs. However, according to management’s earnings call, it was due to “engagement reach[ing] record highs as we added exclusive sports streaming rights with CONMEBOL and began beta testing predictive, free-to-play gaming integrated into our streaming platform ahead of our expected launch this fall.”

Going into Q3, we had published Apptopia data showing that the company was already illustrating strong downloads and DAU growth, likely from the Olympics. The return of sports events is a major boost for the company’s year-over-year top line growth, yet the sequential strength is where Fubo provides a glimpse of a more sustainable trajectory. The management now expects the fiscal year 2021 revenue from $560 to $570 million, which represents an increase of 116% at the mid-point. Previously, it had estimated revenue to be $520 to $530 million.

The monthly average revenue per user (ARPU) increased by 30% to $71.43; this was one of the key drivers for the increase in margins. The adjusted contribution margin came in at 8.3%, up from -4.4% in the same period last year.  This is a step in the right direction, although there’s more work to be done on profitability before we see institutional interest pick up.

Fubo is in a high-growth phase. It’s not uncommon for a rapidly growing company to show losses; however, we want to see a deceleration of these losses as the company scales.  Fubo’s gross losses shrunk from $4 million in Q1 to $2 million in the recent quarter. Considering that their gross losses were $18 million in the year-ago quarter.

It’s also important to point out that Fubo’s cash balance of $400 million supports about 9 quarters of operations ($406 million in cash / $47 million in Q2 adjusted EBITDA). Therefore, it’s reasonable to expect the company may raise money in the near term, which can dilute shareholders. As an investor, I am not too concerned about this (Tesla did it many times), although my preference would be that Fubo raises cash in Q1 or Q2 after the launch of its betting app so the market can understand and assess the company’s full potential.

https://images.prismic.io/bethtechnology/e9aea4e7-de25-47d1-ba74-c8ac103ebe32_FuboTV+Delivers+Record+Numbers.png?auto=compress,format

Source: Fubo Investor Relations

As seen above, the advertising revenue growth was the best ad revenue quarter in the company’s history. Advertising ARPU grew by 62% YoY to $8.70, up 22% on a QoQ basis. The company has a goal to double the advertising revenue this year.

My main contention is that as long the company can grow its audience, the market will reward it in the long-term. Our previous analysis was focused on the microtrend of live sports OTT and we think these users are stickier than Wall Street realizes.

https://images.prismic.io/bethtechnology/cc9607a6-6a0b-4282-a0b1-a9f320cc59fb_FuboTV+revenue+growth.png?auto=compress,format

Source: Fubo Investor Relations

The company has successfully been able to increase its paid subscribers. The customers continued to prefer fuboTV over legacy pay TV services due to the unique customer experience, innovative product experience, and bundled wide premium content. The company added 91,291 net subscribers in the recent quarter bringing the total to 681,721. This beat the analysts’ estimate of 602,000 and the management guidance of 600,000 to 605,000.

The company also increased the full-year subscriber guidance to a range of 910,000 to 920,000, from previous guidance of 830,000 to 850,000.

https://images.prismic.io/bethtechnology/520652e3-bd4e-440e-ae33-2786a6fb907d_FuboTV+subscribers+Delivers+Record+Numbers.png?auto=compress,format

It’s crucial to not only grow the audience but also retain them. The company has been able to improve the churn rate by 203 basis points year-over-year. The company’s investment in subscriber intelligence and insights helps to lower the churn rate. Management points towards its first-party data for reaching household income above $85,000 and mainly males. This can help the company reach its target of $35 CPMs with current CPMs in the low $20s.

Fubo users streamed over 245 million hours which is an increase of 148%. The company’s monthly active users (MAUs) watched 134 hours per month on average, demonstrating strong customer engagement – we hope this engagement translates well for the free-to-play and sports betting app.

Improving Bottom Line Already with Sports Betting on the Way

The company’s margins are improving with increasing revenue and the management expects this trend to continue. Operating expenses as a percentage of total revenue were 155% compared to 252% in the Q2 2020. Subscriber-related expenses, primarily include content cost, accounted for 92% of total revenue compared to 120% in 2Q 2020. Sales and marketing expenses were 16% compared to 18% in Q1 2021.

We think the market has over-penalized the company for its gross margins with evidence that DraftKings’ sales and marketing costs exceed Fubo’s subscriber costs & broadcasting and transmission fees (when we compare operating margins). Meanwhile, DraftKings trades at a 300% higher valuation. Therefore, if Fubo can illustrate its sports betting capabilities, it should fetch a higher valuation.

Net loss per share was ($0.68) compared to ($2.08) in 2Q 2020. Adjusted net loss was ($51.3) million compared to ($51.5) million in the 2Q 2020. The adjusted EBITDA improved from (95%) to minus (36%) in Q2 2021.

The launch of the company’s Sportsbook is an important driver of the overall strategy as it aims to develop a flywheel that turns passive viewers into active participants. The monetization here can be substantial if Fubo sees cohorts spending more than $100 on their platform. As stated, the income of over $85,000 and persona of their viewing audience lends itself perfectly to sports betting, which is men watching sports. You really can’t get a better audience than that to target a sports betting app.

Fubo Sportsbook will represent an industry-first live sync integration between video and the Sportsbook. Recently, the company has released a short video presentation that is worth watching. The short sellers accused Fubo of buying a headline with Balto Sports, which was surprising to me to find out these analysts don’t know that YCombinator often incubates small teams. This is common knowledge in tech.

The unique feature is that FuboTV’s sports betting app will allow its users to watch and bet from the same platform. Fubo announced last month that it had completed a market access agreement in Pennsylvania with The Cordish Companies. Currently, the company has market access deals in 4 states, namely, Pennsylvania, Iowa, New Jersey, and Indiana.

FUBO commands about 6% of the virtual MVPD space. So, it’s very likely that over the long-term, the company is aiming between 3% and 6% of the total betting TAM. Right now, sports betting is expected to be a $218 billion market globally.

In the words David Gandler, “The secular decline of traditional television; the shift of TV ad dollars to connected devices; and online sports wagering, a market opportunity which we believe complements our sports-first live TV streaming platform.”

Analyst views

Evercore ISI analyst Shweta Khajuria responded to the results by repeating her Outperform rating and lifting her target price to $40 from $33.90. “We continue to view Fubo as a key beneficiary to three industry trends,” she writes in a research report. “Cord cutting, as viewers shift away from linear TV to streaming; mix-shift of advertising dollars from linear TV to [streaming]; and growing demand for online sports betting.”

Likewise, Oppenheimer analyst Jed Kelly reiterated his Outperform rating, while lifting his price target to $42 from $32. Kelly cited stronger-than-expected subscriber growth, driven by a “strong sports calendar,” and improved churn. “Most OTT providers have focused on low-cost entertainment offerings, forcing sports fans to remain tethered to pay TV,” he writes. “FuboTV is exploiting the opportunity in sports by providing a comparable viewership experience at a lower cost than its pay TV counterparts.”

What’s next for Q3

We have already published Apptopia data that shows July was strong in terms of audience growth. You can view the full article on Forbes here.

https://images.prismic.io/bethtechnology/e9e03b6b-31ff-4475-88c2-15cc5f7272c7_FuboTV+Daily+DAU+Delivers+Record+Numbers.png?auto=compress,format

Source: Apptopia 

Also, the company’s exclusive rights to South American World Cup Qualifiers is a game-changer as it helps to solidify the company’s brand ahead of next year’s FIFA World Cup. The company was also able to increase the number of consumers in the recent quarter through the launch of LG Smart TVs. It has also partnered with Vizio to launch on their popular SmartCast platform.

Additionally, with the NFL football season, we would expect the growth in the DAUs to continue in the second half of the year. If the company can launch the free-to-play soon, then we may see the flywheel effects of this as soon as Q3.

I/O Fund has partnered three times now with Apptopia to deliver pre-earnings numbers – twice for our free newsletter subscribers and once for premium. Stay tuned for our next pre-earnings coverage next quarter.

As stated in the article, Beth Kindig and I/O Fund currently own shares of FUBO. This is not financial advice. Please consult with your financial advisor in regards to any stocks you buy.

Royston Roche contributed to this article.

Gains of up to 485% from our Free Newsletter.


Here are sample stock gains from the I/O Fund’s newsletter --- produced weekly and all for free!

+370% on Nvidia

+485% on Bitcoin

*as of May 02, 2024

Our newsletter provides an edge in the world’s most valuable industry – technology. Due to the enormous gains from this particular industry, we think it’s essential that every stock investor have a credible source who specializes in tech. Subscribe for Free Weekly Analysis on the Best Tech Stocks.

If you are a more serious investor, we have a premium service that offers lower entries and real-time trade alerts. Sample returns on the premium site include 2583% on Nvidia, 806% on Chainlink, and 665% on Bitcoin. The I/O Fund is audited annually to prove it’s one of the best-performing Funds on the market, with returns that beat Wall Street funds.

beth

More To Explore

Newsletter

With Bitcoin at All-Time Highs, Here’s What’s Next for COIN, HOOD

With Bitcoin at All-Time Highs, Here’s What’s Next for COIN, HOOD

Bitcoin and the spot BTC ETFs have clearly seen strong investor appetite since the approval in the beginning of the year. Alongside strong initial adoption of the new ETF class, we’re also seeing majo

June 13, 2024
Jensen Huang Presentation

Here's Why Nvidia Stock Will Reach $10 Trillion Market Cap By 2030

I believe Nvidia can achieve an astonishing $10 trillion market cap by 2030. As you’ll see from the key points to my thesis, there is a bull case where a $10T market cap estimate in a little over six

June 10, 2024
TSMC Building

Taiwan Semiconductor Stock: April Sales Soar From Advanced Nodes

Despite warning of a slowdown in the broader semiconductor industry this year, TSMC’s April sales surged 60% YoY and 21% MoM. This marks a positive start to the 20-percentage point acceleration to 33%

June 02, 2024
Jensen Huang Presentation

Nvidia Q1 Earnings Preview: Blackwell And The $200B Data Center

Nvidia’s management team will focus on the H200 in the upcoming earnings call, but make no mistake, we will end this year in full-on Blackwell territory. The new architecture is at the forefront of tr

May 28, 2024
Amazon Building

Amazon Stock: Nearing $2 Trillion Club From AWS Growth & Ads Catalyst

Amazon is on the verge of joining the $2 Trillion Club, driven by a 4-percentage point accelerating in AWS to 17% YoY growth combined with strong 25% growth in advertising revenue.

May 21, 2024
Big Tech Logos

Big Tech Q1 Earnings: AI Capex Increases As AI-Related Gains Continue

Recent Q1 earnings releases from Microsoft, Amazon, Alphabet and Meta reaffirmed that AI spending is continuing to increase through 2024 as companies seek AI-related revenue gains.

May 14, 2024
The Risk is Higher in the Market than it Feels

The Risk is Higher in the Market than it Feels

In this report, we will show that the sentiment readings over the last several months suggest investors should be cautious. This is backed up by our broad market analysis, which indicates that risk is

May 02, 2024
We Are Raising Our Bitcoin Targets To $106K - $190K

We Are Raising Our Bitcoin Targets To $106K - $190K

Bitcoin is an asset where the bulls pound the table to “buy, buy, buy,” and the bears relentlessly and stubbornly call it a scam. In reality, both are the wrong approach. This is because although Bitc

April 26, 2024
Investing In AI with Beth Kindig: 1-Hour Video Interview

Investing In AI with Beth Kindig: 1-Hour Video Interview

Jordi Visser, CIO and Chairman of Weiss Multi-Strategy Advisers, spoke to Beth Kindig on the Real Vision podcast on March 20th, to dive deep into AI’s potential for explosive economic growth, how to f

April 19, 2024
https://images.prismic.io/bethtechnology/Zh50DEaI3ufuUONy_SemiconductorStocksQ4OverviewAIGainsHeatUp.jpg?auto=format,compress

Semiconductor Stocks Q4 Overview: AI Gains Heat Up

Semiconductor stocks are standout performers so far in 2024, with investor appetite for AI stocks remaining elevated as AI chip leader Nvidia continues its streak of high growth.

April 15, 2024
newsletter

Sign up for Analysis on
the Best Tech Stocks

https://bethtechnology.cdn.prismic.io/bethtechnology/e0a8f1ff-95b9-432c-a819-369b491ce051_Logo_Final_Transparent_IOFUND.svg
The I/O Fund specializes in tech growth stocks and offers in-depth research for Premium Members. Investors get access to a transparent portfolio, a forum, webinars, and real-time trade notifications. Sign up for Premium.

We are on social networks


Copyright © 2010 - 2024
Get Free Weekly Analysis on the Best Tech Stocks