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B2Digital (BTDG) Underestimated as Gym and MMA Segments Show Unprecedented Growth

It is our mission here to highlight names that seem to contain potential that hasn’t yet been spotted by the market. We would submit B2Digital Inc (OTC US: BTDG) as an interesting case study in that light.

For some background, BTDG is an emerging name in the fitness, combat sports, and live sports media markets.

BTDG is building a strong brand in the rapidly growing mixed martial arts and “hardcore” fitness training space. The company has already established a foothold on potential market leadership in this area and has tangible results starting to show up that further this case.

The company has a market cap of around $5 million despite posting triple-digit topline growth on course for $5-10 million in revenues over the next two years.

With that type of growth rate in a market space showing overall strong growth, one might expect a price/sales multiple of 2-3x on a forward basis, implying a simple triple in share price from here if the company can further prove its model.

That model is built of a combination of live sports events featuring MMA fight nights viewed both in-person and over a growing PPV reach through OTT streaming on Apple TV and Amazon Fire, and a gym segment that has expanded from one location to five locations over the past few months, where the company is driving rapid topline growth that is projected to reach $4-5 million in annual revenues over the next year.

The important insight is the notion that the former pursuit provides an accelerant to the latter pursuit. They work hand in hand.

In other words, as its brand and reach in the MMA space grows through its B2 Fighting Series events, that brand can be harnessed to drive market edge in its fitness and training facilities.

 

Hand in Hand

To pursue this path, B2Digital Inc (OTCMKTS: BTDG) is pushing on two levers simultaneously:

1) driving more events that are more successful to an ever-widening audience with ever-easy access through an ever-growing marketing apparatus, and 2) driving a growing training gym network that improving stickiness in an ever-growing number of top-tier hardcore fitness facilities.

In the mix, as noted, is the marketing channel that connects these two pursuits: as the B2 Fighting Series brand grows, presumably, that will drive more business to training facilities connected to that brand definition.

At the same time, as the B2 Training Facility Network grows, that will drive more talent to its fighting series events. It’s a virtuous circle.

And, more to the point, both are growing… fast.

 

MMA Event Expansion

B2Digital Inc (OTCMKTS: BTDG) recently provided an update on financial performance data from its recent Live Events, noting that both the rate of events per month and the contribution of PPV sales are seen by the company as escalating versus pre-pandemic assumptions, with PPV sales increasing 1,550% on average, per event, compared to pre-pandemic levels, and the company now reportedly on pace to put on 50 or more events per 52-week period, which represents an increase of roughly 100% as compared to pre-pandemic levels.

According to its recent communications, that puts the company on pace to see $1.5-2M in Annualized Sales from its live events alone. And that excludes sponsorship revenues, which represent a quickly approaching additional line of income.

“We are seeing a number of very positive trends and dynamics crystallizing in recent performance data from our Live Events,” commented Greg P. Bell, Chairman & CEO of B2Digital. “The upshot is this: through updates and investments in our team, equipment, and expertise, we have acquired the capacity to put on Live Events at a much faster pace than we have in the past. At the same, our PPV marketing has evolved to produce much better results, and we are also likely approaching the end of live crowd attendance restrictions before too much longer, which should have a large impact on cash flowing in the door, especially given the accelerated frequency of our events. Finally, we are also likely on the doorstep to beginning the process of monetizing our brand and events through the sponsorship channel. That is another significant factor that we believe will become a major part of our longer-term strategic roadmap.”

We would also note, as the company did, that its in-person audience “gate” ticket sales are likely vastly understated relative to potential because it has been constrained by regulations related to the pandemic. That restriction is attached to a ticking clock that is rapidly winding down toward absence as vaccine-induced herd immunity approaches in the US live events marketplace.

 

Gym Expansion

B2Digital Inc (OTCMKTS: BTDG) has witnessed the same strategy working wonders for its gym segment.

By leveraging its MMA brand to drive fitness and training memberships at its network of gyms, the company cultivates a committed base of members who are more likely to be “stickier” as gym customers because they represent the hardcore segment of the gym-going population. That reduces turnover while it increases the efficacy of marketing.

In its past two quarters, the company has seen accelerating revenue growth in its gym segment, last reporting 126% sequential quarterly growth. Given the recent sharp expansion in its MMA efforts, one might expect that rate of growth to further accelerate in coming quarters, especially as it continues to gobble up new gym locations along the way.

The result could be 300-500% expansion over the coming year, particularly if we don’t see widespread new lockdowns over coming months and a safe and effective vaccine rolls out without major unforeseen delays in 2021.

Here is what the company’s management said several months ago: “Based on the strategy we have in place – and the assumption that we don’t see major new pandemic-related shutdowns that impact the business – we are targeting $4-5 million on the topline over the rolling forward next twelve months. This is based on the growth we are seeing now and the continued successful implementation of the company’s roll-up strategy in our Fitness Facility segment, which is the real breadwinner in our broad vision. We are already on pace to more than double the topline on a sequential quarterly basis into year-end.”

Every aspect of the company’s surrounding context has evolved since that point in a manner that roughly matches what one must see as the best-case scenario, from a long-term growth perspective.

And, more to the point, since that note, the company has acquired yet another major gym as it continues its rapid pace of expansion.

 

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