Pinned straw:
I'm looking forward to reading other SM reports on $CAT today, as I am focused on other things today and won't make the call, but I've just noticed their headlines:
- Annualized Contract Value (ACV), Catapult’s leading indicator of future revenue, grew 20% on a constant currency (CC) basis year on year (YoY)
- The Company hit a milestone revenue mark of US$100.0M (A$152M), up 20% (CC) YoY
- Profit Margin improved +125% YoY resulting in US$4.6M (A$7M) of Free Cash Flow
My quick calculation of FCF is $2.767m (OpCF $31.703 + InvCF -$27.055 + Leases Repaid -$1.972m), however, I've not checked the change in working capital on this.
And of course, this overlooks the hefty non-cash share based compensation element of $9.7m. Which I think means we are being diluted about 4% each year - correct me if I'm wrong.
All that said, the 6-month view below indicates that $CAT has made the transition to a sustainable business. If they can keep on this track. (Note: H2 receipts is seasonally weaker, but look at the cost control. Can they sustain this?)
I recently dipped my toe back in the water with $CAT in RL and SM. I'm still not convinced, so will have to have a harder look at this when I get the time. The slope of my FCF line is promising, however.
Overall I thought it was a solid set of results.
My (minor) gripe is around how they present headline numbers. The free cashflow number excludes rent and interest payments - it should be around +$900k for the year, not +$4.3m. “Management EBITDA” is essentially EBITDA including capitalised dev but excluding stock-based comp - which I guess is marginally better than EBITDA but still fluffy. They’ve also shifted around fixed and variable cost numbers. So if one compares the FY23 fixed/variable costs from last year’s presentation, it doesn’t match up.
Yes, they like to bring forward good news (free cashflow, Management EBITDA as a proxy for profitability). And yes, they like to promote on what a good job they’ve done (shifting around cost categorisation for a comparison). However they have done a good job.
Catapult is free cashflow positive now. Top line numbers are growing solidly. Costs are being managed extremely well, and the company is demonstrating operating leverage. During the half they won the New York Yankees as customer, as well as made major inroads in video with its Sideline Video product for the NCAA. The latter, should they penetrate the other conferences outside of SEC, could have the potential opportunity of $20m ACV or greater. Collegiate and women’s sports are also becoming major tailwinds.
I also like the messaging from management. The company should continue to grow at historical growth rates of 18-22%pa. Cost control and operational leverage will continue to be a focus. When asked about M&A on Ausbiz, the response was along the lines of: Nah, we’re cool the way we are.
A growing company with predominately subscription revenue, at a free-cashflow inflection point, with the potential to explode out of it with continued tight cost control. And with products that are globally unique, continuing to gain traction and being validated by some of the most prestigious customer signings. There’s a lot to like here.
I added to my real-life position yesterday.
I did put together my thoughts about the result
https://arichlife.com.au/catapult-international-asx-cat-fy-2024-results-analysis/
I'm still digesting the results.
Just wanted to quickly point out that $2.3m of the share-based payments is related to the SBG acquisition earn-out. Doesn't make a huge difference, but something to note
oh boy, a video highlighting key results? Full marks for production value, but.. perhaps just a little over the top :)
I'll let everyone read all the key figures from the release (see here), but as others have pointed out the key points are:
- ACV and Revenue grew 20% YoY
- Free Cash Flow improved by $26.2M to $4.6M
- Retention remained high at 96.5%
- ACV per pro team increased 7.2%
- Number of multi-vertical pro teams grew 32%
- Gross margin expanded from 76% to 81%
- Contribution margin increased from 34% to 46%
- Management EBITDA turned positive at $4.2M, up from -$14.2M
The company has finally, and hopefully sustainably, crossed a key inflection point towards accelerating profit margins. Will stated they exceeded their target of generating 30% incremental profit margin for each additional $1 of revenue.
The big picture here for me is that you have a company here that, despite some big missteps in the past, continued to deliver strong and sustained top-line growth and remains the clear industry leader. Some really potent network effects at plat too. What I like about Will is that he has been clear in his vision, messaging and execution -- what we're seeing today has come about by some decisive actions from him and the team.
And there's still a long way to run in my opinion.
As for the negatives, yeah the share based comp is pretty generous. But so long as they deliver it's not too onerous (and helps them preserve cash). If performance stalls, i'd take a very different view. I've got a tentative acceptance from Will to come and talk with us -- so i'll put this to him.
As for a cap raise, you can never rule it out, but I don't think it's a guarantee. I think they are acutely aware that it'd be poorly received by the market given past follies.