Standard & Poor’s is the big dawg amongst financial analysis companies and they regularly provide credit ratings that give investors an idea of how risky investing in a business is. Since 2007, Zuffa has been rated as BB-, which means ‘more prone to changes in the economy’. In non-creditor speak, that means Zuffa looks stable barring a shift in the economy (lol yeah right USA #1) or shift in consumer taste (aka this all turning out to be a fad).
Now S&P just upgraded Zuffa from BB- to straight up BB and included a bunch of interesting info on how the company makes it’s money to justify the switch. Here’s some of that via MMA Payout:
-Specific mention is made of the UFC-WEC merger as potential source of incremental ticket and ppv sales growth.
-The volatility of consumer tastes and preferences continues to be a slight concern as these may impact PPV revenues, but the report also cites the development of new fighter talent and regulatory acceptance as additional risk factors.
-However, the company’s strong EBITDA margin and healthy cash flow conversion rate are reportedly sustainable over the near to intermediate term and partially off-set concern over volatility in PPV earnings and risk factors mentioned above.
-The report reinforces that 75% revenues are event-related; PPV buys account for nearly 60% of all PPV event revenue while gate and sponsorships account for the rest.
-The remaining 25% of revenue comes from live and taped broadcasts on SpikeTV, merchandise, and digital media revenue; much of that is broadcast revenue, but an emerging portion is merchandise and digital media.
-EBITDA margins are expected to track within a consistent range in the future, even with expansion into new markets like Brazil.
-Liquidity remains strong due largely to limited capital spending requirements.
Debt: $50 million credit facility expiring in 2012; $425 million term loan due in 2015.
Considering how much money the UFC rakes in off PPV, it’s pretty impressive to hear that it only accounts for 60% of the money made off an event. We all know about the UFC’s great gate sales, but this shows what kind of sick, sick sponsorship money the company has rolling in. I wish there was more of a breakdown of the non-event chunk that makes up digital media and merchandise … I’d love to know what kind of dough the UFC makes off locking it’s prelims up in that terrible vault of theirs. Considering money isn’t a concern but ‘development of new fighter talent’ is, you’d think prelims could do more than net the company 2$ a pop from a tiny number of hardcore fans.