Live sports and TV streaming service fuboTV (NYSE:FUBO) announced better-than-expected results in Q1 CY2024, with revenue up 24% year on year to $402.3 million. It made a non-GAAP loss of $0.11 per share, improving from its loss of $0.37 per share in the same quarter last year.
fuboTV (FUBO) Q1 CY2024 Highlights:
- Revenue: $402.3 million vs analyst estimates of $381.3 million (5.5% beat)
- EPS (non-GAAP): -$0.11 vs analyst estimates of -$0.15
- Gross Margin (GAAP): 6.9%, up from 1% in the same quarter last year
- Free Cash Flow was -$70.76 million compared to -$5.85 million in the previous quarter
- Domestic Subscribers: 1.51 million
- Domestic ARPU: $84.54
- Market Capitalization: $464.8 million
Originally launched as a soccer streaming platform, fuboTV (NYSE:FUBO) is a video streaming service specializing in live sports, news, and entertainment content.
fuboTV's original focus on live soccer paved the way for a broader scope, and the company has since evolved into a versatile streaming platform that includes a wide array of major sports leagues, news, and entertainment content. This growth aligns with the increasing shift towards cord-cutting, positioning fuboTV as a comprehensive and flexible alternative to conventional cable TV. fuboTV's on-demand content is accessible across multiple devices, increasing convenience for its subscribers.
fuboTV primarily generates revenue through subscription fees and has various add-on plans to suit different content preferences. This strategy has enabled fuboTV to attract a demographic that values choice, convenience, and comprehensive coverage on a user-friendly platform.
Media
The advent of the internet changed how shows, films, music, and overall information flow. As a result, many media companies now face secular headwinds as attention shifts online. Some have made concerted efforts to adapt by introducing digital subscriptions, podcasts, and streaming platforms. Time will tell if their strategies succeed and which companies will emerge as the long-term winners.
Competitors in the live TV streaming market include YouTube TV (owned by NASDAQ:GOOGL), Comcast (NASDAQ:CMCSA), Charter Communications (NASDAQ:CHTR), and DISH Network (NASDAQ:DISH).Sales Growth
A company’s long-term performance can give signals about its business quality. Any business can put up a good quarter or two, but many enduring ones muster years of growth. fuboTV's annualized revenue growth rate of 74.2% over the last five years was incredible for a consumer discretionary business. 
Within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends. That's why we also follow short-term performance. fuboTV's recent history shows its momentum has slowed as its annualized revenue growth of 37.9% over the last two years is below its five-year trend.
This quarter, fuboTV reported remarkable year-on-year revenue growth of 24%, and its $402.3 million of revenue topped Wall Street estimates by 5.5%. Looking ahead, Wall Street expects sales to grow 11.9% over the next 12 months, a deceleration from this quarter.
Operating Margin
Operating margin is an important measure of profitability. It’s the portion of revenue left after accounting for all core expenses–everything from the cost of goods sold to advertising and wages. Operating margin is also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.
Given the consumer discretionary industry's volatile demand characteristics, unprofitable companies should be scrutinized. Over the last two years, fuboTV's high expenses have contributed to an average operating margin of negative 27.1%.
in line with the same quarter last year. This indicates the company's costs have been relatively stable.
EPS
Analyzing long-term revenue trends tells us about a company's historical growth, but the long-term change in its earnings per share (EPS) points to the profitability and efficiency of that growth–for example, a company could inflate its sales through excessive spending on advertising and promotions. 
Over the last four years, fuboTV cut its earnings losses and improved its EPS by 41.7% each year.
In Q1, fuboTV reported EPS at negative $0.11, up from negative $0.37 in the same quarter last year. This print beat analysts' estimates by 26.9%. Over the next 12 months, Wall Street is optimistic. Analysts are projecting fuboTV's LTM EPS of negative $0.81 to reach break even.
Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can't use accounting profits to pay the bills.
Over the last two years, fuboTV's demanding reinvestments to stay relevant with consumers have drained company resources. Its free cash flow margin has been among the worst in the consumer discretionary sector, averaging negative 16.9%.
fuboTV burned through $70.76 million of cash in Q1, equivalent to a negative 17.6% margin, increasing its cash burn by 9.6% year on year. Over the next year, analysts predict fuboTV will continue burning cash, albeit to a lesser extent. Their consensus estimates imply its LTM free cash flow margin of negative 11.8% will increase to negative 4.8%.
Balance Sheet Risk
Debt is a tool that can boost company returns but presents risks if used irresponsibly.
fuboTV is a well-capitalized company with $168.9 million of cash and $44.63 million of debt, meaning it could pay back all its debt tomorrow and still have $124.2 million of cash on its balance sheet. This net cash position gives fuboTV the freedom to raise more debt, return capital to shareholders, or invest in growth initiatives.
Key Takeaways from fuboTV's Q1 Results
We were impressed by how significantly fuboTV blew past analysts' revenue and EPS expectations this quarter. That was driven by outperformance in its domestic average revenue per user (ARPU) of $84.54 compared to estimates of $79.81. On the other hand, it was still unprofitable from an adjusted EBITDA perspective, though its loss did meet Wall Street's projections. Zooming out, we think this was a great quarter that shareholders will appreciate. The stock is up 5.2% after reporting and currently trades at $1.63 per share.
Is Now The Time?
fuboTV may have had a good quarter, but investors should also consider its valuation and business qualities when assessing the investment opportunity.
We cheer for all companies serving consumers, but in the case of fuboTV, we'll be cheering from the sidelines. Although its revenue growth has been exceptional over the last five years, its cash burn raises the question of whether it can sustainably maintain growth. And while its projected EPS for the next year implies the company's fundamentals will improve, the downside is its operating margins reveal poor profitability compared to other consumer discretionary companies.
While we've no doubt one can find things to like about fuboTV, we think there are better opportunities elsewhere in the market. We don't see many reasons to get involved at the moment.
Wall Street analysts covering the company had a one-year price target of $2.98 per share right before these results (compared to the current share price of $1.63).
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