The fitness space has been broadly outperforming expectations in 2020. One could have imagined this to be one of the hardest hit areas. But the space has weathered the difficult context and may now be poised to take its place as an interesting thematic growth opportunity for investors as markets begin to discount a full post-vaccine reopening trade.
One name that is potentially a natural fit with this theme is B2Digital Inc (OTCMKTS:BTDG), a company that has been mostly associated with Mixed Martial Arts PPV as “the development league in the MMA space”.
However, as was covered in detail in the company’s most recent release, this is actually a fitness market play given that its primary cash cow is its roll-up strategy in the gym space. As we see it, the company is now anticipating a monster breakout in growth as this equation begins to gain traction.
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.
Underappreciated Growth Trend Already Underway
B2Digital Inc (OTCMKTS:BTDG), as noted above, has strong ties to the MMA space as the “development league for Mixed Martial Arts”. However, as the company has noted, its roll-up strategy in the fitness facility market is the real breadwinner. That puts it squarely in the gym space as a strong contender with enough potential to put it on the radar for investors interested in the space.
To help clarify that narrative, the company recently put out an update for its shareholders on its outlook and the accelerating organic and strategic growth underway in its Gym segment, as well as its performance related to this strategy during the three months ended September 30, 2020, and its expectations for related performance during the current quarter ending December 31, 2020, and beyond.
“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,” commented Greg P. Bell, CEO of B2Digital. “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.”
According to the release, BTDG saw a 76% jump in Gym revenues on a sequential quarterly basis in its latest quarter. In addition, the company increased overall revenues across segments by 126%, Q/Q.
The company also noted that it believes the numbers will double again this quarter. In addition, BTDG plans to continue its roll-up strategy in the fitness facility market over the coming twelve months. The company’s objective is to acquire one to two new gym facilities every quarter with our goal to increase these acquisitions as the spread of Covid-19 decreases nationally.
Thus far, each acquisition the Company makes in the fitness facility space is believed to represent at least $400K per year in rolling forward next twelve-month revenues based on past historical performance.
This strategic process could lead to huge growth. As noted in the company’s release, “At this pace, given current metrics and assumptions, including no major return of mandated pandemic-related shutdowns relevant to its current fitness facilities, the Fitness Facility segment could achieve just shy of $4 million in revenues over the rolling forward next twelve months if the company’s acquisition objectives are executed as planned. Paired with a conservative assumption of $75K – $100K in monthly revenues from its live MMA events, encompassing 3 planned fights a month at current revenue achievement rates per fight, the Company believes it has the potential to achieve total revenues of at least $4 to $5 million over the rolling forward twelve months.”
The Dawn is Nearing
B2Digital Inc (OTCMKTS:BTDG) has positioned itself with a process of distressed-asset acquisitions in the gym market that have left the company in prime position to capitalize, likely with accelerating performance as the economy fully reopens in a post-vaccine world next year, which will allow for what appears to be a relatively predictable swell in the number of people ready and willing to get back out consistently to a public fitness facility.
But the big value proposition here is the ecosystem BTDG has created to power its marketing efforts. The company capitalizes on its leading brand image tied to the MMA cultural phenomenon. That allows it to market through its fan and follower channels and develop customer relationships that hold the potential to form stickier loyalty from customers because it harvests those relationships from a pool of potential customers already more predisposed to put a lasting premium on working out to maximize their competitive well-being.
The company has already seen performance metrics that demonstrate its brand value in the space as its acquired entities have shown strong increasing performance trends following their integration with the B2 MMA Training brand concept.
This sets the stage for reasonable anticipation of outperformance relative to its guidance parameters as we move into a context following widespread distribution of a safe and effective virus vaccine solution.
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