This company, which primarily develops sport content and presents it by subscription network, TV, online, and live events earning revenue from subscription of network and pay per view, licensing of program (TV), advertising and sponsorship, and live event ticket and consumer products, has been grouped into sport streaming sector in video& audio goods and service industry.
It seems that the demand for sport stream and broadcasting content in US market has been strong in the past three years. We have seen continuingly increasing paid network subscription for major stream provider in this sector. We have also seen increased licensing contract from TV media and increasing advertising demand and sponsorship. However, paid TV subscription has decreased due to shifting of viewers to digital platform.
However, for live events attendance seems to be declining while companies seem to have been able to raise price of ticket. Revenue of toys declined with less events and less attendance. Demand for physical media products has declined.
Due to increase in network subscription and increased licensing fees and advertising, we have seen largely improved margins since 2015. However, the margin for live event business seems to be declining due to less average attendance and toys sales.
The gross margin, based on typical company’s data, is about 41%. With about 29% SG&A as percentage of sales, the typical operating margin is about 12%.
It seems that the demand for MMA program has been strong as indicated by increasing network subscription and TV related revenue including licensing fees and advertising ( growth in network subscription tends to be slowing but TV related revenue including licensing and advertising has increased fast). Physical media demand decreased. Live event attendance decreased but price of ticket has kept increasing.
The first three months of fiscal 2018 compared with the same period of 2017
Total revenue was flat attributable to increase of 10% in media sector (digital subscription, licensing and advertising and sponsorship) offset by decrease of 4% in live event (less international events and decreased attendance offset by rising price ) and decrease of 33% in consumer products (revenue recognition delayed).
Fiscal 2017 compared with fiscal 2016
Total revenue increased 10% attributable to increase of 11% in media sector (subscription, licensing, and advertising offset by physical media), increase of 5% in live event (more events and rising price offset by decreased attendance), and increase of 5% in consumer products.
Fiscal 2016 compared with fiscal 2015
Total revenue increased 11% attributable to increase of 9% in media sector (subscription, licensing, and advertising offset by physical media), increase of 16% in live event (more events and rising price offset by decreased attendance), and increase of 10% in consumer products.
Its gross margin has been improved significantly from about 36% to 41% since 2015 attributable to continuingly improved margin in network and TV section as a result of increased subscription and licensing fees/advertising. It SG&A as percentage of sales was flat at around 29% and its operating margin increased to 12% in 2018. Its EBI/share has increased largely during this period of time.
Stock performance
This company is having an enterprise price/EBI (a) ratio of 62 (after adjusted with annualized cash flow). We think that its stock is being relatively overvalued.
