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#H1 FY24 Results
Last edited 4 months ago

I'm not going to have a chance to look at the latest results from Catapult properly until tomorrow afternoon, but at a glance these results seem very encouraging.

Presentation is here

Top line growth remains very strong, and they have even reported positive free cash flow. Hopefully, that will be the case going forward. There's some good signs operating leverage is being realised too.

The market should like this.. (hopefully!)

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#Momentum-Related Good News
Added a month ago

More good momentum-related news from CAT this morning.

PWHL League Win for Video Solutions

  • CAT announced a new partnership with the Professional Women’s Ice Hockey League (PWHL)
  • Empowers all 6 PWHL teams with CAT’s cutting edge video solutions to enhance game strategies and performance analysis
  • Catapult’s video solution will equip the league with a transformative toolset to elevate the speed, efficiency, and impact of video analysis.
  • League-wide + Women Sport + Video - a good win on all these fronts


2024 - Year for advancement of technology in Women’s sports 

  • Catapult recently surveyed over 700 industry experts and one of the pivotal trends set to reshape the sports technology landscape is the growth of technology in women’s sports. 
  • According to Catapult’s recently published report “2024 Sports Trends & Predictions”1, 2024 is poised to be a landmark year for the advancement of technology in women’s sports with an overwhelming 80% of industry professionals anticipating a larger role of sports analytics in this domain. 


This makes sense given the prominence in women sports in 2023 - Matilda’s, AWFL, Women’s Cricket successes, particularly. CAT is very well positioned to capitalise on this.

Discl: Held IRL and in SM

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#Podcast
Added 3 months ago

https://podcasts.apple.com/au/podcast/stocks-neat/id1601739181?i=1000639779364


podcast link with the CEO of catapault. I thought it was interesting. Will shared some good insights into the video product. It certainly seems an interesting feature and a great cross sell.

Will certainly has steered the ship in the right direction since commencing as CEO. Let’s hope he continues.

disc: I hold a very small parcel IRL.

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#Podcast
Added 3 months ago

Will Lopes interviewed on Forager "Stocks Neat" Podcast https://podcasts.apple.com/au/podcast/stocks-neat/id1601739181

A Good overview of the past, return to cashflow positive and future...

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#Bullish Technicals
Added 4 months ago

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I have been watching CAT for a while now and is finally getting close to my buy set up so thought I would up date you all. So far it has performed perfectly to my target zones and is behaving to my Fib levels spot on. Today it should reach the upper end of wave (i) on the chart @ $1.25 and the retrace to approximately the 1.03 - 1.07 zone for wave (ii) before starting the next large wave (iii) taking us up to the 1.50 - 1.64 zone of wave (iii). Ill update you all when it reachs the wave (ii) zone on my thoughts then although I will be looking to enter around there with a hard stop just below.


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##Bullish Tecnicals
Last edited 3 months ago

Update on CAT. Thought I would update the charts for cat as it drove higher than my last post (should have seen that coming as it was pushing for the top of the incline channel). So looking at it now it seems to be in a side ways consolidating period. Im still waiting for a retrace back for wave (ii) down to aprox 50% of the last wave marking somewhere around 1.14 my new revised target after it pushing higher than i originally thought. I have noted Bell Porter has down graded Cat from BUY to HOLD confirming my thoughts of an impending retrace. So here is what my charts looks like now.

06e560d9a3c9d42bc2323af4251b873829d74f.png

I have put alerts on it for the bottom pink support line (and coincidently the 50% mark of the last big wave) and also on the 50sma on the 1 day chart to alert me its heading in my target direction. FYI im looking to enter on the next major pull back. Ill let you know when it gets down there as to my udated plans

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##Bullish Tecnicals_ Cat Charts
Added 2 months ago

Update on Cat charts

This is a bullish stock im also hungry to be part of. We can all see by the agressive moves up over the last year and is playing nicely to my targets so far. It has almost satisfied my rules when it finds this next bottom (wave(ii) of the larger wave3) and I will be layering in a sizeable position with a hard stop loss below. My target should be @ the $1.12 SP however when its a bullish stock as this one is, they dont always make it to my targets and proceed to rocket up before reaching them. I will probably take a smallish position before it reaches my target then layer in once I see that its heading up as I predict. Its a fluid choice of course and will take it day by day.

The next wave up (wave3 of 5) is going to be great and is usually the most bullish of any 5 wave structure. As you can see Jeffries (brokerage firm) has a target of $1.50 however I feel it may go even higher (wait and see) See my updated charts below.

Good luck everyone.

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##Bullish Technicals_chart upda
Last edited 3 weeks ago

Im starting to layer in a position, here's why.

1Day chart

d3e7b7e89f03a911317a499d55b0e0444f6901.png

30m Chart

646a4251eefef59e92fe2ad6ec1b36f9c1dbe7.png

Ignor the last green bar up on the 30m chart after I took this screen shot, that was me starting my position. See timiing is impossible really though I do have targets and Im now conflicted if this is the bottom or we still have another small wave 5 down to go. So im staring to build my position. I think the graphs above show everything Im thinking. I do believe it will soon move up with some energy.

The circle on the stochastic indicator on the 1d shows the current (white line) to be above the Yellow (longer term 30m position) which is point pointing down. Thats the only reason I see another drop coming to approx. $1.19 - $1.16. There is a lot of support between 1.13 to 1.19 with moving averages and a historic Support level in there as well.

The market has also been pre empting reporting season lately and building up positions before hand incase of a good report (Drone Sheild, hence why it dropped on a great report, they pumped it up too far).

If this plays out how I expect it to then I will be adding substantially to my position taken today and will be holding much longer term to ride the 3rd, historically the largest, wave up.

Good luck all hope this gives some insight from a technicals perspective.

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#competitors
Added 6 months ago

Hey Guys,

Wondering if anyone has heard of Catapult publicly addressing the threat of Apple or Google (via Fitbit) ever seriously entering the prosumer wearables market...

So if Google purchased Fitbit, are punters hoping Apple might sniff around Catapult...or perhaps historically that's not Apple's strategy....

Cheers,


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#ASX Announcements
stale
Added 6 months ago

Big tick for Will Lopes. Good for ongoing continuity, certainty and skin in the game.

Catapult Group International Ltd (ASX:CAT, ‘Catapult’ or the ‘Company’), the global leader in sports technology solutions for professional teams,is pleased to announce the appointment of Catapult Chief Executive Officer, Mr Will Lopes, as a member of the Board in addition to his role as CEO, effective today. 

"Since 2019, he has worked tirelessly to enhance Catapult's innovation pipeline, has executed the valuable SBG acquisition, and has accelerated the Company's transition to free cashflow without sacrificing growth. All shareholders should be very pleased with this appointment, and the signal it sends to the market about Will's ongoing commitment and belief in Catapult. We look forward to the continued success of the business under the strong leadership of Will and his executive team."

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Valuation of $1.660
stale
Added 7 months ago

Time to update this valuation again (actually, I really need to update a lot of valuations! But will start here)

The tl;dr of the last valuation ($1.40, penned August of 2022) was essentially:

Assumed 15% CAGR in Revenue for the next 5 years, with the business generating a 10% net margin at that point (which is less than what they *should* be capable of). With 235m shares on issue, or 250m to account for some performance shares etc, that's an EPS of 9cps in FY27.

Let's give that a PE of 25 and discount back by 10%pa to get an intrinsic value of $1.40.

\

Since then, shares have gone from $1.10, to 60c and then back to $1.20 (briefly) more recently. So the market is definitely having a hard time figuring out the value.

But over the last year I'd argue that we've seen genuine progress, with the new management team essentially delivering on exactly what they promised -- all while maintaining 20% ACV growth. They *should* be FCF +'ve this year and incremental margins should get a lot better now they have a more cost aware approach.

I'm not going to alter my assumptions too much:

FY23 revenue was A$130m. I'll grow that by 15% per year to get $260m in FY28 revenue.

Management have made a big deal of the margins they believe they are capable of, citing a 30% operating margin as scale effects kick in.

So I'm going to up my net margin estimate slightly to 12%, to get a FY28 NPAT of $31m.

Their share count is already at 250m, so i'll use 290mm for FY28 to get an EPS of 10.7cps.

Let's apply a PE of 25 to get a target price of $2.68, and discount that back by 10%pa for a fair value of $1.66.

As always, this is necessarily rather rough. But there's a very big margin of safety at the current price, and I could be tempted to use more bullish assumptions if they continue to execute (and visa versa!)

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#Reaffirmed guidance
stale
Added 8 months ago

Catapult has today given a trading update following the end of their first quarter (their financial year ends in March)

It looks like the company is (finally!) on the cusp of being free cash flow positive. And top line growth remains strong.

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They don't usually do quarterly updates, and there's not a lot of detail, but you can read the full announcement here

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#Does data really help?
stale
Added 2 years ago

Yes the paper was more concerned with what is done with the data and who has access to it which, is a valid point. Most organisations should have systems in place to effectively monitor this access.

Anyone involved in high performance sport will tell you that the data is only as valuable as the knowledge and understanding of those using and interpreting it.

As someone with 20yr+ in high performance sport I can tell you that tracking load, progressive loading, effective periodisation and adequate recovery and regeneration protocols are essential for long term athlete development and performance maximisation.

The ability to collect, collate, monitor, interpret and individualise relevant and essential performance data has enabled the progression of individuals, individuals within a certain position and individuals in particular events. 

Consequently, the guess work has been eliminated you know have the ability to make evidenced based decisions allowing you to see what work someone has done from their first year to their last year. Consequently, loadings can be adjusted based on training age, position requirements, the event/games demands and the particular importance of the game, event or particular point of a competitive season. 

Of course there is a point where too much data can cause paralysis by analysis but that’s the responsibility of the high performance coordinator to decide in tandem with other support staff and the coaching unit what is important and what’s just noise. 

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#FY22 Results
stale
Added 2 years ago

Some good coverage has been given to CAT recently so I won't delve into any of the numbers. There was a clear expectation from shareholders that some FCF would start to come through. Management went in completely the opposite direction and spent large on growing ACV.

I'm willing to accept that management knows what's best in the long run. What I couldn't accept is a capital raising to fund an acquisition after having pursued the strategy of growing ACV at all costs. This would be the ultimate deal breaker for me.

Management need to prove this can continue to grow revenue >20% and stop haemorrhaging cash whilst they do it.

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#FY22 Results
stale
Added 2 years ago

Have been busy for most of the day, but when I skimmed Catapult's results this morning my first instinct was "the market should like this".

But, with shares ending down 10%, it seems I was way off base!

So let's dig in and see why that might be.

Of course, the company was keen to put its best foot forward. And it did have some genuine positives to report.

  • The transition to a subscription model is largely complete, with subscriptions now 92% of total revenues (and 98% for the Professional Performance & Health segment)
  • ACV grew 32% (double FY20) and was 51% higher in the all important Americas market.
  • Average Annualised Contract Value (ACV) per customer was up 4.2%
  • Customers that contribute to ACV were up 16.3%
  • P&H churn remained low at 3.5%
  • MatchTracker and Vector integration ahead of schedule, with Tactics and Coaching growth of 29.7% in APC during the key selling season.
  • Customers with more than one solution grew 27%, showing good success with cross selling, and they expect this to accelerate with the integration of MatchTracker and Vector
  • Positive operating cash flow (just, and with some caveats)
  • US$26m in cash on balance sheet and growth spend fully funded.
  • Strong prosumer ACV growth (but off a very small base)


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Aside: The transition to SaaS always has a bit of a drag on revenue, as revenue that was previous booked upfront is now recognised over a much longer period. The advantage is that it provides for smoother and more consistent cash flow and revenue, and (ideally) makes for an easier purchase decision by the customer as it's a smaller ongoing cost, rather than a large one off cost. It transitions expenditure from Capex to Opex. Now that this transition is behind them, growth in revenue should more closely match growth in ACV.

The best part of Catapult has (to my mind) always been the Pro P&H segment, and here we saw 32% ACV growth and they have still only captured <10% of the available market opportunity. I've said it before, but i wish they had remained focused purely on this instead of trying to expand into too many other areas, too quickly.

At any rate, they did what they did, and while that has seen higher costs and investment spend, they do have (finally, i hope) a market ready product in Tactics & Coaching (T&C) and a solid P&H customer base from which to cross-sell from.

Indeed, the T&C segment has a large addressable market for which they have only captured less than 2.5%. The customer spend here is higher than for P&H and enjoys 90% gross margins and even lower churn (1.5%). The APAC region was the only market in which the newly integrated product was able to be sold (due to the different sales cycles in different geographies), and here T&C ACV was almost 30% higher, compared to just 7.2% and 3% in the Americas and EMEA, respectively. It bodes well for future growth when they start to present this to the northern hemisphere markets.

The company is targeting long-term ACV of >US$400m, compared to US$63.9 at present.

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If we just take expanded penetration of P&H, T&C and increased customer spend, that takes us to just shy of US$300m. The rest is inorganic (acquisitions) and prosumer -- and i'm not really keen to put much weight on that. Still, it's a decent uplift if it can be achieved.

Ok, so all of that seems pretty good. Catapult is now a more pure play subscription business with a fully fledged market ready product set and very strong ACV growth with a very large market opportunity still ahead -- and they remain the largest player in this space.

And you get exposure to all of this for 2.6x ACV or 2.2x revenue. That just doesn't seem demanding at all -- especially with the company guiding for FY23 ACV growth of 20-25%. AND, management said they were fully funded to achieve growth ambitions (ie. no more capital raises)

So, what's the market worried about?

Well, mainly, the company is still not profitable. When they hell are we going to see some scale advantages start to emerge? Surely not for a while if they keep increasing the expenses -- in fact, we saw cost increases across sales, product and operations. I'm all for spending money with a good ROI, but c'mon guys! I think we've been patient, but when are we going to see the results? Show me the money!!

The NPAT was negative US$32m

EBITDA negative US$5.8m, even on an underlying basis

Positive operating cash seems largely a result of shifting a lot of expense to the investing section (capitalised development COGS costs). Free Cash Flow was negative US$17.9m

I do think the new CEO is far more targeted in the investment spend, but I was hoping to see even more restraint. Especially in this new market environment which is far less tolerant of cash burning operations.

So i do get the market's reaction now that I've had a chance to dig into the details. But, call me an optimists, the potential here remains very attractive:

Catapult is a market leader in a large and resilient industry undergoing structural change (digitisation). There is genuine sales traction, and that's growing at very strong rates. The revenue is very sticky and with attractive gross margins. It is also, apparently, well funded and on track to achieve its ambitions without the further help of shareholders.

Sadly, until they achieve sustainable free cash flow, while still maintaining growth, the market is likely to remain sceptical. And fair enough.

If it wasn't for the very solid ACV growth, and expectations for that to continue, I'd be out of here. But, for better or worse, i'm prepared to stay put for now. I think it's called the endowment effect...

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#FY22 Results Briefing
stale
Added 2 years ago

Shares now down 25% in the 4 trading sessions since FY22 results were released. As I said at the time, there was a few factors that weren't great, but c'mon -- that's pretty harsh! Talk about an unforgiving market.

If you want a little more "colour" on the released results preso, CEO Will Lopes and CFO Hayden Stockdale talk through them here:

https://www.youtube.com/watch?v=pSePDHiyyVE

Worth watching just to see how management are pitching the story.

While it's easy (OK, very easy) to be a little jaded, there is still a pretty good story here...i think.

It is worth remembering that Will has only been on board for 2 years -- he inherited a bloated company with a poorly coordinated product set, flailing strategy and was just about to bear the full brunt of a pandemic which shut down sporting events around the globe.

They just delivered 32% ACV growth and are expecting 20-25% growth in the current year. And with most revenue now subscription based (a key goal of Wills when he took over), that ACV growth should largely translate to revenue growth. They still have <10% market penetration and are the current industry leader with deals across the biggest teams and leagues in the world (and a big x-sell potential there too, especially with a fully fledged T&C offering that has demonstrated strong growth already in ANZ). The goal of US$400m in ACV was again reiterated, which is 6-7x greater than present.

OK, costs did blow out, and you don't want to ignore that, especially given the company's history of poor cost control, but there are some genuine one-offs and non-cash items there due to the SBG acquisition, the balance sheet is very strong (US$26m), they expect to be operating CF/EBITDA positive going forward, and all growth investment is conforming to the rule of 40.

The hint of weaker margins due to higher wages, COGS and supply chain issues is probably a factor for the market too, although this isn't an issue specific to Catapult. It was good to see gross profit and contribution profit grow faster than revenue. So at least on that front some scale advantages are emerging.

So, it's not like this has no hairs on it. Still, in AUD terms, the business is sitting at around $90m of confirmed revenue for the current year. Again, that's on track to grow 20-25% in FY23, and grow to over AUD$550m worth in the coming years. Importantly, and again you need to take management at their word here, the business is self funded to achieve these goals.

On a fully diluted basis, the market says this company is worth less than $210m.

For my sins, I think the market is wrong. I'm continuing to hold.

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#eSports partnership
stale
Last edited 2 years ago

Catapult has announced its entry into the eSports market with a partnership with NASDAQ listed Motorsports games (NASDAQ:MSGM). (see here)

There's no doubt that eSports is an exciting space, and Catapult was keen to emphasise the size and growth of the sector. And given the data they collect, it makes perfect sense for them to move into this domain.

But..

There were no details on the nature of the multi-year subscription agreement (although we can assume it's not material in and of itself, as it wasn't marked as a market sensitive announcement).

Moreover, I'm not sure Motorsports Games is that impressive a customer. Their latest instalment of their Nascar series looks to have bombed:

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Reading through the reviews, it's pretty brutal stuff.

That being said, NASCAR 4 & 5 have much better reviews, and it's also probably fair to say that these titles are more aimed at the very serious end of the market, and not casual gamers (you need a steering controller to play these games).

Looking at MSGM's track record, shares are down ~70% since listing and the latest quarterly result isn't great (although they claim this is due to the timing for some of their releases). In the last 9 months, they made US$120k from eSports segment, down from US$290 in the previous corresponding 9 month period. Again, there are timing factors at play in relation to when events were held, but they are clearly a very small player in this space.

I'll be keen to ask management more about this at our upcoming December meeting.

Anyway, like I said, this is a logical area to move into and a great way to gain extra value from the data they collect. I'd just like to better understand the nature of these deals, what development and operational costs are needed to support this foray, and whether or not they are partnering with organisations that have any strong presence in the eSports market.

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#Does data really help?
stale
Added 2 years ago

Heard a report on ABC AM this morning about the data collected from athletes, and the concerns over privacy of player data (eg how it could be used by betting agencies).

https://www.abc.net.au/radio/programs/am/first-time-voters-weigh-election-choice/13830338 (start at 16:07)

What caught my ear, however, was the claim that this data doesn't actually deliver on its claims to "reduce injury and improve performance"

I managed to track down the discussion paper referenced in the story, which can be found here. It's a long read, and the focus is really on the privacy angle. It doesn't elaborate too much on the effectiveness of this data -- and where it does it seems to be on specific metrics.

I don't see this as a thesis buster, and my thinking is that at the elite level clubs will go for anything even if there's a small chance of providing an edge. But I wanted to share in case others have a different perspective.

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#German Football Assoc.
stale
Added 2 years ago

Catapult today announced it had signed the German Football Association (DFB-Akadamie) as a new customer, with a multi-year, multi-solution contract.

It covers all 15 teams across womens and mens national teams for the video solution, and for 10 teams with the wearable product.

No financials given, and the announcement wasn't marked as price sensitive, so likely not material in and of itself. But hopefully acts as a useful reference customer given the German FA is one of the more significant sports federations globally.

ASX announcement here

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#Financials
stale
Added 10 months ago

Results after market closes today. Strange to reslease this news 10 mins before close.

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#Free Cash Flow Positive
stale
Last edited 2 years ago

Hi totally hear you @PeregrineCapital

Part of the problem here has been a lot of moving of the goal posts. First it was talk of EBITDA positive, then operating cash flow positive, and now Free cash flow positive.

I mean, great, all are worthy aspirations. And I do think FCF is a better metric to focus on, especially as operating cash flow can be made to look a lot better by marking some expenditure as investing cash flows. It's certainly much better than EBITDA.

But it's understandable that investors could look at this latest announcement with some cynicism.

To be fair, covid threw a bit of a spanner in the works. And I'll also allow for the fact that it would take some time to unwind previous management's largesse (although covid would have been the perfect cover). And it's not always a bad thing to spend heavily when there's a sound strategic rational.

But to my mind if there was any fat to trim -- especially that which wouldn't impact growth, which is what they are claiming -- then why wasn't this made a priority before!? Cost management is something that should always be in focus.

Moreover, they added costs in the recent year as part of an accelerated investment in sales, product and operations. Are we to surmise that these are the same costs that are now being unwound? Or was there just loads of additional expense elsewhere?

The announcement was also a little vague in exactly what expenses and in what areas would be cut, but I assume its prosumer mainly.

Also, reading between the lines, what is it they are seeing on the business' front lines that has prompted this focus on costs? Macro conditions were mentioned, but again that's pretty vague.

Anyway, the market has welcomed the news, and I'm not going to argue against the intent. If they can sustain 20% ACV growth and pivot to FCF +'ve I dare say we'll see a re-rate. But let's see how it goes.

I maintain my position because, despite some hairs, I just think shares are cheap. (they are on something like 2x ACV)

ASX announcement here

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#Ice Hockey Video Analysis
stale
Added 2 years ago

Catapult has launched GameTracker for Ice Hockey -- which integrates all the various datasets it captures (through wearables and video). This comes only a month or so after they released this functionality for BasketBall. Amercian football is the next area this will be applied to.

These upgrades all stem from the acquisition SBG, whose tech is being rapidly incorporated into the full product stack. The idea is that this should strengthen the offering (no one else is offering this functionality yet, from what i can tell) and make the cross/up-sell more compelling (and there's a lot of potential here in my opinion).

The Hockey business is up 7x over the last 5 years -- admittedly off a low base. Although ACV from their Vector product in Hockey has doubled in the last year. It shows the broad applicability of these solutions across different sports, and given the current penetration there's still a long growth run way.

The ASX announcement can be found here

Am increasingly impressed with the new CEO. We spoke with the Chairman last December (see meetings page), but I'll see if we can line up a chat with Will Lopes.

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#FY2023 Results
stale
Last edited 10 months ago

A very solid result from Catapult. I wont repeat all the key figures (see here for the details), and @jcmleng and others have already provided a great overview. But some key highlights include:

ACV came in pretty much on my expectations at 20.2% YoY growth. H2 was the highest growth in ACV on record.

EBITDA was -US$11m, compared to my estimate of -US$15-20m.

Positive operating cash flow, and by a decent margin, showing a 40% improvement. They remain on track for +'ve FCF in FY24. Based on H2 cash outflows, the first half of FY23 would have been +'ve, as the business has reduced fixed costs by $US3.6m.

Churn at record low of 3.8%

Margins very much moving in the right direction -- variable costs now 56% of revenues compared with 68% in previous H2. Importantly, fixed costs were 47% of revenue (58% pcp) and CAT said "the absolute cost of G&A can now support the business at scale and is expected to rise modestly"

At an inflection point, with every incremental dollar of revenue expected to generate a 30% profit margin.

Video has just <3% penetration among the Pro segment. Lots of cross sell opportunity, and this product set has the highest gross margins (90%).

Existing Pro customers increased the spend by 6.8%

Of course, while companies love to focus on EBITDA, depreciation costs are very real (about $20m per year), and NPAT was -$US30m. Still this is a story of two halves -- NPAT for H2 was -US$8.9m thanks to a US$26m improvement in fixed costs and better gross margins.

Turnaround thesis is on track.

Held.




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#HY22 Results
stale
Last edited one year ago

Well, there's your answer @jayjayjayjay -- looks like some in the market were able to anticipate Catapult's results. Must be nice to have psychic powers! (or somehow benefit from a bit of "leakage".. disgraceful stuff)

Aaaaanyway..

It was a strong result; a record A$59.6m in revenue for the first half, up 11%.

89% of total revenue is now on a subscription basis.

ACV was up 21% on a constant currency basis to US$70m. That's the 3rd consecutive half of 20%+ growth in ACV. Strong.

Great to see ACV also growing on a per customer basis; it was up 18% in the Pro Segment. And the cross-sell initiative is working well, up 33% since September last year.

I'm just repeating the key points made in the announcement at this point -- but it is worth highlighting the 'resizing' which should see them back at positive free cash flow in FY24 (that's within 16 months from now given the March end financial year). They expect to save US$12m per year on this initiative.

Combined with a new funding facility, the company stressed that another capital raise would be avoided. Although, to be honest, I was already hoping that would be the case, but looking at the cash flow statement it looks like it would've been a closer call than i was expecting. It seems the accelerated investment in growth initiatives was more 'accelerated' than I had expected.

At the end of the latest half they have US$15m in cash and although Operating cash flow was slightly positive, a lot of cash costs are marked as investing cash flows due to the capitalisation of equipment etc, so FCF was negative US$13m. And, as @AUROPAL rightly pointed out, that's a big deterioration on the -$US2.9m in FCF in the pcp.

You can watch a management briefing here (I haven't watched yet, but will catch up on it later tonight)

Doubling this half you have a business on a P/S of 1.7 or so. One with a high degree of recurring, high gross margin revenue, and that's been growing ACV at an aggressive rate -- a pace management think they can sustain.

If they can indeed deliver sustainable FCF as they suggest, i'd expect a significant rerate. Let's see...

[held]

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#Acquisition
stale
Added one year ago

Catapult Capital Raise History – Raised Approx. $197.5m since December IPO 2014, today CAT market cap is $178.2m (Closing Price $0.73 Dec 2022).


·      June 2021 – Raises $43.5m, $35m Institutional, $8.5m Retail SSP at $1.90 per share

·      March 2018 – Raises $25m Institutional at $1.10 per share

·      May 2017 – Raises $17m, $14m Institutional, $3m Retail at $2 per share

·      July 2016 – Raises $100m, $91m Institutional and $9m Retail at $3.00 per share

·      Dec 2014 - IPO Raises $12m


Catapult Acquisitions


·      June 2021 – SBG Sports Software $40- $45m comprising of $20m in cash, $20m in deferred CAT shares, up to $5m in CAT share subject to achievement of agreed key performance indicators.

https://www.asx.com.au/asxpdf/20210623/pdf/44xlwvwk4015zc.pdf


·      November 2020 – Science for Sport – No amount stated, profitable subscription online sport learning platform.

https://www.asx.com.au/asxpdf/20201124/pdf/44q60ghvmkfbwg.pdf


·      August 2017 – SportsMed Elite and Baseline athlete management system (AMS) products and clients, and recruits key personnel from SMG Technologies Pty Ltd (SMG) for $1.9m.

https://www.asx.com.au/asxpdf/20170807/pdf/43l6llnpjcjqg6.pdf

 

·      July 2016 – PLAYERTREK (Kodaplay Ltd) - €3.3m (A$4.9m), with €2.4m (A$3.6m) payable in cash €0.9m (A$1.3m) payable in scrip consideration. – leading developer of wearable analytics software solutions for the prosumer market.

https://www.asx.com.au/asxpdf/20160713/pdf/438jn9zw2q7p45.pdf


·      July 2016 – XOS Technologies – US$60m (A$80.1m) – a market leader in providing innovative digital and video analytics software solutions to elite sports teams in the US.

https://www.asx.com.au/asxpdf/20160713/pdf/438jn9zw2q7p45.pdf


Leadership Changes

·      May 2021 – New Chief Technology Officer, Param Hegde

https://www.asx.com.au/asxpdf/20210511/pdf/44wd52cs2b15l3.pdf


·      30 October 2019 – Mr Will Lopes appointed as CEO commencing 11th November 2019. Mr Lopes former Chief Revenue Officer of Amazon subsidiary Audible.

https://www.asx.com.au/asxpdf/20191030/pdf/44b16jkj4jwyn2.pdf


·      7 February 2019 – CEO Joe Powell resigns.

https://www.asx.com.au/asxpdf/20190207/pdf/442fq1tl5lhp3f.pdf


·      19 Dec 2018 – Co-found, Current CTO Igor Van De Griendt steps down from CTO role 

https://www.asx.com.au/asxpdf/20181219/pdf/441cpnhr0ftsqj.pdf


·      1 May 2017 Joe Powell – Shaun Holthouse steps down from CEO and moves Global Head of strategy

https://www.asx.com.au/asxpdf/20170407/pdf/43hcff1mc20nb4.pdf


·      Founded by Shaun Holthouse and Igor van de Griendt in 2006. Listing late 2014 with Shaun as CEO.


Insider Ownerships (Net worth based on closing price $0.73) and Percentage of total CAT shares owned


Founders                                                         

Igor Van De Griendt (Charlajo Pty Ltd)           20,508,000 Shares ($14.97m)            8.4%

Shaun Holthouse (Manton Robin Pty Ltd)      17,675,000 Share ($12.9m)                7.3%

Adir Shiffman (Long term                               6,042,100 Shares ($4.41m)                2.5%

Current CEO Will Lopes                                  225,731 Shares ($0.164m)                 0.09%


Previous Shareholder 5 years ago. Currently do not hold or plan to hold CAT shares.  

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#CFO Meeting
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Added one year ago

Some quick thoughts following today's meeting with Hayden.

Will & Hayden have been on board for 3 years now, and seem acutely aware of past issues with costs and poor capital allocation integration. They have since transitioned to subscription, have clear ROI hurdles for ongoing investment, and have managed to sustain ongoing strong growth in ACV. The business maintains a solid lead on competitors and has a lot of addressable market to capture.

I've long been bullish on the opportunity, but continually disappointed by the inability of the business to become self-funding. And that remains the elephant in the room -- can they finally transition to cash flow positive and deliver decent margins, all while sustaining good top-line growth.

On that front, Hayden referred a couple of times to a 40% EBITDA margin at scale, with an attainable net margin of 17%. We also spoke to the credit facility they have in place to help them cope with the seasonality of the business, and get them to cash flow positivity in FY24 -- and that they expected to avoid any future cap raise. We'll see i suppose.

If they can, 1.7x ACV seems extremely cheap. Then again, the market has good cause to be skeptical... We've heard all this before from the prior team.

Against better judgement, perhaps, i do cut them some slack. 3 years -- during which we were hit by a global pandemic -- isn't that a long a time to try and turn around a bloated business, while still sustaining customer and sales growth. And with shares again in the 70's it just strikes me as an asymmetric bet.

Still, a few well known Buffett'isms come to mind:

  • It's better to own a wonderful business at a fair price, than a fair business at a wonderful price.
  • Turn arounds rarely turn.


I feel Catapult has all the ingredients for a great business, but we've yet to see good evidence that it will become one. And I'm mindful of the rationalisation i often use in these situations -- "yeah, it's got a few hairs on it, but it's more than accounted for in the price!"

For my sins, I continue to hold. Even a broken clock is right eventually, right?

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#Industry/competitors
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Last edited 11 months ago

From dirty rascal to king of the castle?

Interesting recent AFR report and commentary on Catapult:

https://www.afr.com/markets/equity-markets/catapult-ceo-tells-doubters-it-does-not-need-to-raise-capital-20230403-p5cxmu

I can understand long-term shareholder frustration but I’m personally liking the narrative of Catapult’s longevity and pedigree in a competitive space. It feels like this industry is still in ‘land-grab’ mode and that just holding on to the high-ground is most of the current battle — the spoils of that war come later. The tech devices and cameras themselves are ultimately commoditised long-term I think. I wrote a somewhat harsh bear case on Catapult, several years ago, on that part of the story and have since been proven wrong. It looks like the aim of the game is to be the king of the castle with the commanding views. The fight for positive free-cash-flow might be just the bloody and muddy bit the first kings do before their successors can live off the spoils by taxing the masses. The latter is the golden age. The good bit between the massacring warlord and eventual decline (when the great-great grandkids publish whingey ghost-written autobiographies). The former never looks pretty — even in hindsight.

The prize is dominant market-share of elite sport. My investment thesis is one of eventual pricing power and/or buy-out.

SaaS, can normally make me a bit ‘meh’ when I read or hear that. Everything seems to be SaaS now. But I definitely don’t know enough about it in this case. To me, however, this company is starting to look a bit more analogous to US based AXON which I like. Very different field, but in that case, the original tech (the taser) now pales in future significance to their data storage solutions (their database of body worn camera footage) which generates much larger margins, stickiness, and ARR.

Maybe Catapult will stand the test of time yet.

fe1f0d5e6fdfb817210bdae422ccdd528e446c.jpeg

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#Financials Surprise
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Last edited 10 months ago

Is this the beginning of “the” turnaround?

On first glance this was significantly better than I think most expected.

From the ASX announcement.

H2 EBITDA OF 2.2m a 15.4m improvement from H1.

H2 gross margins up to 81% from 71%.

Cost to operate the business dropped 11.9m in H2 from H1.

Operating cash flow + 40% YoY to 3.7m.

SaaS revenue +21.8% YoY (CC) contributing to a total revenue of 84.4m.

Record H2 sales: FY23 ACV +20.2% to 76.8m (CC).

ACV churn a record low rates of 3.8%

Performance and Health vertical ACV grew 28% YoY (CC).





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#ACV growth
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Added 2 years ago

Catapult has seen a 43% jump in Annualised Contract Value (ACV) from a year ago, with churn dropping back to a near record low of 4.1%. That's a US$17.6m increase over the last 12m to US$58.8m (about $79m AUD).

Part of this was due to the recent SBG acquisition, but excluding this the business still saw a very healthy 30% boost in ACV, largely from its Performance & Health segment.

Importantly, multi-solution customers grew 49% year on year -- and i think there's a lot of opportunity remaining here. Also good to see the balance sheet in a strong position with the company having US$42m in cash at the bank (that's about 10% of the company's market cap).

We'll get the full first half results on November 17, and the company is holding an investor day on Nov 9 (you can pre-register here)

With shares on ~5.5x ACV, and given the accelerating pace of growth, i still see shares as good value. 

ASX announcement here

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#FY23 Results
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Added 10 months ago

Very short 14 minute call as the detail of the preso is contained in a pre-recorded video that accompanied the results announcement.

Will reiterated the highlights of the FY23 performance

eb036f7d7c380a1447ea7eb45a9f2f4f684a53.png

Then took 3 questions, as that was all that was forthcoming, responses to those questions:

  • Wearables growth came from expansion in underperfoming regions - EMEA, US Collegiate, Latin America/APAC
  • Confident of sustaining the 25% growth in wearables as (1) only ~2,400 professional teams are customers vs 20,000 professional teams (2) good greenfield growth in FY23, expect to maintain this pace of growth in the next 2-3 years (3) launching of 2 new products in FY23 which opens up new markets
  • Vector T7 - opens up basketball which is under penetrated
  • Vector Core - lighter version of Elite Wearables designed to help very large organisations support lower tier teams
  • Video growth came from 2 areas:
  • Legacy Video solution, 7% growth targeted at American Football and Ice Hockey, mostly from upsell and price increase
  • SBG Video solution 27% growth, targeted at Soccer, Motosports etc - this is almost Wearable-like growth
  • There is a transition plan for NFL from Legacy to SBG Video starting this season, fully transition in the next 1-2 seasons
  • Strategy of “Land with Wearables, Upsell with Video” is working very well - there was a 9% growth for customers with 2 products - expecting this to rise to 30-50% (if I heard correctly) as they focus on upselling more video
  • FY23 was the year that saw the operating leverage from the SAAS model kick in
  • Focus in FY24 is to return to FCF positive - very confident of this occurring as EBITDA has been a good proxy for FCF


Will need to view the management pre-recording to further digest the results, but am liking what I am seeing thus far.

My view remains that the turnaround has already occurred since Will/Hayden rocked up. The FY23 results is the evidence of that turnaround working and in play - game on!

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Valuation of $1.050
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Added 9 months ago

Just running some very rough numbers to see what figures I get.

Assuming 10% CAGR revenue growth for the next 5 years:

  • FY28 Revenue of around $135m (USD)

Assuming Net Margins of around 10%:

  • NPAT of around $13.5m USD, converted back to AUD around $20m

SOI of around 300m accounting for some share based payments to employees gives EPS of around $0.067 per share.

Assuming a PE of 25x in FY28 and discounting back 10% per annum gives a share price of around $1.05.

Probably more of a calculation of what assumptions need to be made for the current share price (around $1.00) to give you a decent return.

Disc: Held IRL and on Strawman.

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Valuation of $1.800
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Added 2 years ago

231m shares plus 15m options. At 1.80 approx market cap of about 440m at my valuation. This is substantial size business, so what do you get....

  1. Dominant player in growing market. Currently revenue of ~A$100m and reasonable to assume this grows at 20% for a while. I've held CAT for a number of years and concern has been around competition. I'm a european football fan and is great to see a lot of key clubs now on their subscriber list, their absence had always concerned me (EPL now 80% captured). The chart provided vs competitors made it pretty clear too. Good to see the chart of 20k elite sports teams, with currently ~2.5k on Catapult so still long runway in the base business.
  2. Growth markets in motorsports and e-sports. I feel like these areas and much more of their growth (upselling, cross selling etc) should come at higher margins. Selling to and onboarding a new club/league must be expensive, upselling, cross selling, tactics and coaching and e-sports (no clubs to worry about in case of esports - much more consolidated customer base I would expect) should be much better margins.
  3. Some hard work done in recent years on switch to subscription revenue under a new CEO with background at the amazon machine. Churn now at 4% and expect that the transition tainting results somewhat, in my opinion a buying opportunity for the patient. The Chairman spoke very highly of Lopes in the strawman call, sounded like he is genuinely pulling the company in a more professional direction. I'm a little concerned they couldn't retain some of their COVID savings - I'm assuming gross and contribution margins don't fall from here.
  4. Has also been a period of digestion of acquisitions over recent years and I think there signs that video, coaching and tactics etc can help accelerate growth.
  5. US$42m in cash, ~A$60m. losses, R&D, small acquisitions can be supported for a few years to come to allow CAT to further enhance dominance and break into growth areas.


What could go wrong from here....

  1. return to profligate spending culture. Resulting in further raisings and dilution for the dreaded "working capital". Poor acquisitions is also a risk here I believe. These two factors have seen the share price stall over 4 or 5 years really. There's opportunity cost risk here, however don't think there's serious risk of collapse in the shareprice due to this
  2. Some major player gets interested in the space and overpowers Catapult, or at least erodes margins significantly. Could include a significant tech advancement or just a better wearable. Would take a while and I expect year by year CAT are building customer loyalty that mitigates against this, however an R&D war is unaffordable just to defend the base business.


On balance I'm comfortable parking money in CAT with a view that there is asymmetric upside. There's a little bit of "once bitten, twice shy" around the investment community I believe after all the dilution in recent years, however the balance sheet, new management, market leading position and potential for growth all at a reasonable price to sales ratio makes it a buy for me. I've been a holder for over 6 years, initially buying in at 1.67 (talk about opportunity cost!) although I sold some at 3.60 and 3.99 in 2016 and increased my holdings again at good prices through 2017 - 2019. I have increased my personal holdings recently at 1.53.

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Valuation of $1.900
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Added 2 years ago

30-Dec-2021: 12 month PT of $1.90, however once it gets above $2 with conviction I think CAT can go to around $2.30 without too much trouble. Good recent report, but they were sold down regardless. New management. New focus on cost control and profitability. I lost interest in Catapult Group for a while because they seemed to have too much hype and not enough performance, were wasting too much money trying to do too much all at the same time, and I wasn't sure about their competitive advantage(s).

I'm comfortable with them now, and I added them to one of RL portfolios at $1.475 on December 10th. I think they look pretty good for a 3 to 5 year hold now that they have that new CEO (Will Lopes). Also, their Chairman, Adir Shiffman, came across OK during that recent Strawman meeting, and what he said about making some minor changes to become more profitable more quickly resonated with me. He said it wasn't hard to do, and it was now a focus, particularly for Will Lopes (the new CEO). I'd like to think they've now broken that downtrend that's been in place since October, and that we might see some positive market sentiment towards CAT now. It might take a report or two for them to really head north with plenty of momentum, but I can be patient. It should be worth it.

Disclosure: I hold CAT in RL and I have a buy order in for them here on SM.

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Valuation of $1.750
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Added 4 years ago
You can only grow at 20%+ for so long before the share price starts to follow. Thesis: - Ongoing growth in core video and wearables - Upside with prosumer High founder ownership / large number of customers / low valuation / 20mil in bank no debt. Risks: -Slowed growth really will be due to --> Out competed --> Poor capital allocation --> Poor cost control Could be making money by next financial year maybe? Might be able to value it then... 5 x ARR (why not) est ARR 2021 = 85mil (15% growth p.a.) ~425mil MC discount 10% for 2 yrs gives ~$1.75/share today
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#NASCAR
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Added 2 years ago

Catapult has signed a multi-year deal with Roush Fenway Racing to use its recently acquired Racewatch solution.

No financials given, and in and of itself the deal is likely not likely material in the overall scheme of things -- but it's an encourage first step into a large and (hopefully lucrative) new vertical.

Roush Fenway Racing is a major player in NASCAR and should serve as a potent reference client for future sales.

Doesn't change the thesis for me, but good to see some movements on this front after their acquisition of SBG Sports a few months back.

Shake 'n Bake ;)

44fa7166c0c91f52baeccf4bc76cb762e1c5de.png

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#SBG Acquisition
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Last edited 3 years ago

Just when you thought there'd be no more capital raisings...

Catapult is looking to raise about $40 million to fund the acquisition of SBG Sports Software -- a London based company that was originally focused on Formula 1 racing, but has since branched into other sports such as soccer and rugby. Their software aggregates multiple sources of video, audio, and telemetry data, and then displays that on a dashboard for analysis.

Catapult will spend $40-45m on the acquisition; $20m in cash, $20m in shares at a $2.15 issue price (granted in instalements over a 12 month period from the first anniversary of the acqusition), and there will also be a $5m earn out if various KPIs are met by FY23 & FY24.

The capital raise comprises a $35m underwritten institutional placement at $1.90 (a 13% discount to the last traded price), as well as a $5m non-undewrwritten share purchase plan for existing shareholders. Two of the directors will also subscribe for $1.35m worth of shares under the same terms.

It's a fairly sizeable transaction, representing about 10% of the current market cap of Catapult. The rationale is that it will bring forward their development of video capabilities by around 2 years, expands the total addressable market (most notably with motorsports), adds 20 new marquee clients from the top 100 soccer and rugby teams (including Manchester city and Tottenham Hotspur), and should boost Annualised Contract value by 28% in FY21.

Funds raised will also be used to accelerate R&D and sales capabilities. So the cost base will again rise further, potentially as much as $25m in the coming years.

There's a briefing at 10:30am Sydney time today, and you can register here if you want to attend.

My initial thoughts are that the company is again at risk of expanding beyond its highly profitable core -- something that hasnt (so far) delivered much value. Especially given the added costs.

Then again, the new CEO Will Lopes seems to be quite savvy and has managed to re-focus the business in recent times. The global market for elite sports analytics is massive and fast growing, and this acquisition has the potential to entrench Catapult as the clear global leader, with a significantly enhanced offering. It also gets rid of an up and coming competitor.

It all depends on how well the acquisition is integrated and what growth it manages to unlock. I'll see what they say in the briefing.

You can read more here

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#New Deal
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Added 3 years ago

Catapult has signed a new multi-year deal with the NBL's Brisbane Bullets.

In and of itself it's not material, but noteworthy in that this is the first time the group's new Focus and Hub video products (derived from the SBG acquisition) have been provided to a Basketball team, the 5th sport the tech has now been applied to.

Also, it comes 3 months after the acquisition of SBG and a year ahead of management expectations.

Each new sporting verticle significantly broadens the market opportunity, and Basketball is a big market. The new offering also gives new entry points for Catapult to secure deals and then upsell additional solutions.

Good news, but will be good to see some bigger, more prominant customers take up the solution.

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#Contract Win
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Added 4 years ago

Catapult has been awarded its largest ever capital deal, providing 16 sports acadamies and teams under Hungray's BKMS Sports with video and wearables services. 

The announcement was not marked as market sensitive, and no financial details were provided, so it's unlikely this deal will be material in and of itself. Though it is encouraging that the company has secured a record contract win in the current environment.

ASX announcement here

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#Bear Case
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Last edited 11 months ago

*** Edit 14/04/2023 —This was my Bear Case and biggest fear for Catapult circa early 2019. I’m re-releasing it, as is, for context to my recent bullishness. I now think most of my concerns were unfounded or have been proven wrong. ***


Catapult – Can Your Capital Withstand the Siege?

Making room for a new little EskyBruh is a great time for decluttering.  Such was the unchecked consumption of my early 20s that I’ve read up a bit on this concept.  One of the authorities on this modern phenomenon is Australian Peter Walsh, who has gone so far as to categorize clutterers according to their style [1].  It turns out I am (was) a ‘techie clutterer’ – a person who holds on too long to old gadgets and their boxes.

The subsequent trips down to Cash Converters reminded me of the folly of anchoring.  The uninitiated may be shocked to find that Cashies will only offer them $3 for their 12 year old 7.2 Megapixel point-and-shoot Sony cybershot camera.  Of course, it retailed at a princely sum for the university student of a bygone era.  Then again, who buys these things now in the age of smart phones?  These sort of experiences make me wary of a company like Catapult.  Gadgets just age quickly these days.

I’ve had some recent success riding the bow wave of the Strawman Index.  However, Catapult – from a thematic or story standpoint – is just not a company I can get excited about.

I know the numbers must be making sense to some, and I lack the expertise to comment on that.  Suffice to say that when you are standing at the buy desk of Cashies, watching DVDs get scanned at 10 cents a pop, you may notice signs for the most exorbitant of short-term loans – with interest rates of up to 215% annualized.   For most of us – lucky enough to never know the desperation of addiction, financial illiteracy or domestic violence – we will only ever understand one side of that transaction.  The numbers are always going to make sense to someone if the company spruiking them knows their audience.

I am learning to pay more attention to the financials before getting too carried away with a story.  But I think you need both. Qualitative and quantitative.  Yin and Yang.  Sales can be improving, but a story needs to still make sense on its second read-through before you commit to anything, lest you end up like Kevin Costner.

For Catapult, it’s not just them reaching the high ground, or what I’d consider to be their shallow moat, that worries me.  It’s the eventual renos of that castle.  The ongoing R&D to keep the technology relevant and competitive is, in my opinion, a massive headwind for Catapult.

If I were a Catapult Bull I would want:

  • a tight time-frame for the market’s uptake of their technology and a precise idea of the shelf-life of their wearables and LPS system;
  • a risk of disruption in a range acceptable to me; and
  • to believe that there was real proprietary value in the data/software they’re pivoting towards.

Right now, it’s just too easy for me to imagine a world where Catapult doesn’t exist and that world not being much poorer for its absence.

My concern is that it could become a ‘bottom drawer stock’…but one in the kitchen, not the mahogany desk.  A bottom drawer like that described by Michael McIntyre, full of stuff just waiting to become more useful [2].

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#Broker Coverage
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Last edited 4 years ago

Morgans has raised its taregt price for Catapult from $1.72 to $2.19.

It has cited the renewal of the Australian Rugby Union contract, and other recent contract wins and increased conviction that Catapult will be self-sustaining by the next financial year.

It is forecasting an ~18% lift in sales for FY20 to $112.5m and an EBITDA of $15m. It expects Catapult to record a net profit in FY21 of $4.17m

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#Management
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Added 4 years ago

Significant selling by founder and also chairman.

Im out.

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#HY20 Results
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Added 4 years ago

A good result for the 6 months ending Dec 31, 2019.

Revenue grew 18% to 50.7m, while the net loss essentially halved to -$4.8m.

Catapult recorded a positive EBITDA of $5.7m compared to a loss of -$1.4m in the prior first half. (They did get a bit of a boost from the adoption of AASB16. On a like for like basis, EBITDA came in at $4.7m)

Importantly, Catapult saw positive free cash flow of $13.6m, which has boosted cash to $24.7m. There's some seasonality here, but the company reaffirmed its expectations to sustainably generate positive FCF by FY21, and it seems unlikely it will need to raise cash again. 

Cross-sell initiatives seem to be doing well, with the number of customers with more than one Catapult product rising 66%. Overall customer numbers grew 19%.

The major North American segment saw growth of 21% in revenue -- it now represents 70% of the total. EMEA grew 15.5% and APAC grew 10%.

ARR grew 20% to $68.8m. 

Perhaps best of all, operating costs declined by 4%. (poor cost discipline in prior periods under previous mamangement was always a big concern).

Churn decreased from 5.2% in FY19 to 4.8% at the half.

Also encouraging to see the previously striggling Prosumer segment improve its loss from -$3.6m to just -$0.4m. Revenue growth was 9%, with reduced costs and marketing spend driving the bottom line improvement. 

Results presentation can be viewed here

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#Easing cost cuts
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Added 4 years ago

Catapult announced that it is unwinding its costs savings measures (reduced salaries and furlough leave) as the impact of the coronavirus has been less than expected.

This announcement was not marked as market sensitive, and no specifics were provided, but I take it as a positive that the company feels such mitigation is no longer necessary (especially with so much business in North America).

I'm not reading into this too much, but felt it was noteworthy.

See here

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#Change of FY
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Added 4 years ago

A small but noteworthy thing: Catapult is changing its financial year end to 31 March and results will be presented in USD.

The main reason is because the current June 30 year end conflicts with the peak Norther Hemisphere selling season, which runs May to August and accounts for 85% of sales. Also, 70% of earnings are in US dollars.

The FY21 will therefore run for only 9 months.

Makes sense to me.

ASX announcement here

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#Oversold?
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Added 4 years ago

Catapult shares are down 65% since the start of the bear market -- around double that of the wider market. 

I think the business will struggle to make ANY sales for the rest of the year, and will be a slow pick up after that. The various leagues they service are all winding back, some entirely. In many cases, player pay is under review.

Catapult's customers are more sensitive to the impacts of this virus than I had first imagined. Initially, my expectation was that elite sports would continue, just without crowds and for broadcast only. But with entire seasons being suspended, this was a flawed assumption. 

The business was EBITDA and FCF positive in the latest half, and was on track for its first full year of positive cash flow, but they could linger in the red a while longer with this big halt to new sales.

That being said, the company has $25m in cash and no debt. That should keep them afloat until some form of normalcy returns for their customers. They also had $68m in recurring revenue, and though churn will almost certainly rise, it gives some comfort that there will be a base of operational cash flows coming in.

After Catapults first half results, i was assuming it could get $112m in revenues this year. That now looks unlikely.

If we assume that professional sport will be up and running again in another year or so, but allow for a big dip in sales and a slower growth rate from a lower base, we could say (for the sake of argument) that Catapult only reaches $112m in revenue and profitability in 3 years time. If we give the company a P/S of only 2, we get a target price of $1.14, which is 75c (the current market price) if we discount back at an aggressive 15% per annum.

In other words, assuming catapult can endure a large but ultimately temporary drop in new sales, you can sketch out a case for value using very low-ball assumptions. 

But maybe those assumptions, as unambitious as they may seem, are not reasonable?

I'll continue to watch closely

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#COVID-19 Impact
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Last edited 4 years ago

Catapult has provided an update relating to the impact Coronavirus is having on its business.

Catapult reiterated its strong cash position, which combined with a recent drawdown of $5m in debt from its existing facilities, gives it ~$30m in cash.

It is working to manage costs and manage working capital (although, no mangement or directors have taken a pay cut -- unlike other pre-profit companies. Seems like that would be the classy thing to do).

The company is "comfortable" its ability to reach cash flow positive has not been materially impacted, and has reiterated guidance for that milestone to be reached by FY21.

Customers continue to use and purchase their products, but purchasing decisions are likely to be deferred, and that Q4 new sales growth is likely to be negatively impacted.

75% of revenues are are based on long-term subscription payments.

The business will benefit from a weakening Aussie dollar. (looking seperately at the FY19 annual report, a 10% fall in the AUD would have boosted profit by ~$3.5m)

CEO Will Lopes said that the group is well placed to navigate the crisis and the strong cash position will strengthen their competive position long-term.

Full announcement here  

 

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#FY20 Results Preview
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Last edited 4 years ago

Catapult is expecting the following for  FY2020:

Total revenue between $100-$101 million, up 5.3% from $95.4m in FY19.

EBITDA of $11.5-12.5m, up 192% from $4.1m last year.

$9m in free cash for FY2020; a big turnaround from the $24m loss last year and achieving a positive result a year earlier than expected.

Cash balance is $27.5m.

CEO Will Lopez said the professional sports landscape had improved since the last update on March 27, and that the business had continued to win new deals and retain customers during the lockdowns. However, this disruption has delayed things and many of the sales that would have been made in the last quarter are now expected to be delivered in the FY21 year.

With cost reductions already in focus, it seems covid allowed the business to cut costs faster and deeper than originally planned. There was always a nicely profitable business inside of catapult, so it's great to see that being unearthed (seemingly) without much of an impact on sales growth.

Speaking of which, 5%-odd top line growth would normally be a very disappointing result, but in the context of a raging pandemic -- one that had a direct and significant financial impact on its customers -- it could have been a lot worse.

As you can see in the chart below, sales are always much stronger on the second half (with sales typically dropping a bit from one year's second half, to the following year's first half). In this instance H2, sales were the same as H1 and down 5% from H2 2019. Normalising FY20 second half result using the H2 19's growth, sales would have come in 12% higher at $112m.

Given things will be tough for the foreseeable future, I'd be happy enough if they could score 10% sales growth for FY21, before returning to 15-20% odd growth (on average) over the coming 5-6 years.

Based on last close of $1.27, shares are trading at an EV/EBITDA ratio of 18. Assuming they can recover to near pre-covid sales growth in the coming years, and maintain cost discipline, that seems very undemanding.

Full results will be out late August.

Read ful announcement here

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#Management
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Added 4 years ago

DOH, my Son wanted to buy some CAT. I said we'll wait for a bit of a drop. I owe him 11% today. :-)

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#CAT added to StrawmanPortfolio
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Added 4 years ago

Hopefully, that screenshot (as described in the forum posts and replies) works - when you click on the "View Attachment" button below.

View Attachment

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#Full Year
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Last edited 10 months ago

10 Days away from these guys releasing their full year too.

Holders, keen to get your take on what you think things will look like this year:

How large of a loss?

Where will growth land?

Wondering what the dialogue will be on cashflow positivity.

Quest Asset Partners Pty Ltd just bought some more last week.

I like this company and the story, and love sports so you got to love it, but have been quite turned off by the constant burn and constant story they promote about the insane blue bird potential.

Anyway, keen to get your thoughts lads.

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#FY20 Results
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Last edited 4 years ago

This was a really good result for Catapult. It gives me further encouragement that the business has indeed (finally) turned a corner, and that the new CEO is on the right path.

  • Subscription revenue up 21%
  • EBITDA up 225% (from $4.1m to $13.3m, and ahead of expectations for $11.5-12.5m)
  • Free cash flow positive, $9 million
  • 39% growth in multi-solution customer numbers
  • Cash on hand of $39.8m (as of 14 August)

Capital sales were down 27% as the peak US sales season was impacted by covid, and as the grouop continues to shift customers to a subscription model. As a result, Revenue was only 6% higher. The company expects a good deal of sales that were deferred in Q4 to be recorded in the current first quarter.

Also, applying D&A, the company still reported a statutory loss of $7.7m.

Looking ahead, the company expects to increase R&D and also some cost reductions acheived in response to COVID will be wound back. The business still expects to generate free cash flow in the current year.

(note, they are moving to a March year end and will report future results in USD to reflect their geographic exposure and better align with sales cycles).

There's a bit of detail to explore, read the results presentation here.

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#Contract Win
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Added 4 years ago

Catapult has been appointed the preferred tech supplier for the French National Rugby Leagure (LNR) team.

The extensive tender process began in 2019 and began with a view to optimise performance ahead of the 2023 World Cup.

No financials were provided, and the announcement was not marked as market sensitive, so this is not a material deal in and of itself.

However, it is encouraging to see Catapult win this deal after such a lengthy and detailed tender process, and that it involves the full suite of technology.

Announcement here

[Disc. held]

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#Renews Agreement 2/2/21
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Added 3 years ago

CATAPULT LICENSING RENEWS AGREEMENT WITH NFL PRODUCTIONS AND BLEACHER REPORT, TO SUPPORT BRANDS LIKE SAMSUNG, GUINNESS, NISSAN, AND ADIDAS

Catapult Group International Limited (ASX:CAT, ‘Catapult’ or the ‘Group’) is pleased to update the market on the progress of its Media & Engagement vertical, with Catapult Licensing renewing and signing several high-profile agreements in FY21.

View Attachment

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#New partnerships
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Added 3 years ago

Catapult announced two new partnerships today; one with PUSH (tech for gym training sessions) and Pro Quick Draw (an online playbook for American football coaches).

The exact nature of the partnerships wasn't disclosed, although it looks as though at the very least it should offer some new sales channels. It seems likely that Catapult would also earn a commission on any partner product sales.

More importantly, to my mind, it helps strengthen the customer value proposition, which should be useful for retention, sales and the network effect over time. Especially as these partnerships lead to better integration of these products.

This is not a material announcement in regard to near term financials, and my valuation remains unchanged.

Some of the legacy issues with Catapult seem still weigh on investor sentiment, but I feel the new team is making all the right moves.

Relative to other tech stocks, Catapult is trading on a very undemanding valuation at 3.6x sales. (eg NEA is also a business that has variable costs -- not near 100% gross margins like a pure-play software company -- and is also growing at similar rates, has a P/S of ~10x)

It's free cash flow positive, well capitalised and growing its ARR at 17%pa over recent years. It still has a long way to run and I think also some latent pricing power. It's the dominant player in a large and fast growing industry, where network effects play an important role.

disc: held

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#HY21 Results
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Added 3 years ago

Catapult's half year results for FY21 were hit pretty hard by the covid-induced slowdown in proffessional sports.

Revenue was off 8%, as teams slashed budgets, but also as the business continued to switch away from capital sales.

Net profit took a big hit dropping 39% due the operating leverage of the business and an increase in corporate overheads (it was flat on an "underlying" basis)

Catapult has really failed to deliver the kind of results the faithful (like me) have hoped for -- at least so far.

Inspite of this, there are still a few reasons to remain hopeful.

Covid was a genuine and massive hit to the industry, particularly in their largest segment (USA). Although that impacted the business, churn was reduced over the period (4.5%, a record level), and ACV grew 8%.

In fact, there was 14% subscription growth in the key 'Performance & Health' segment. 78% of revenue is now recurring in nature, and there was a 19% increase in the number of clients using 2 or more solutions. 

Importantly, the business delivered $8.8m in free cash flow, and has over $24m in cash. It remains very well funded.

I think the business showed itself to be rather resilient given the trading environment.

As sports return to normal, it seems likely that Catapult will remain sustainably cash generative, and soon start to post statutory profit. I remain convinced that the business will be bigger and better in 5 years.

Estimating growth is the hard part, but will update my thoughts in my valuation.

But if the business can return to top line growth of 10-15%pa in the next few years, and if it can transition to profitability, then i think it could get a meaningful re-rate by the market.

If it falls short, shares could easily drop lower in the coming years, but my view is that the downside is less than the upside, given the low multiple CAT currently trades at. ie. the market is not pricing in much growth anyway.

disc: held

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#Industry/competitors
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Added 2 years ago

I rarely post another analyst's notes on a company because...well, there's so many and who is to say whose is better than the next? But this deepdive on Catapult's competition is worthy of calling out, given it's popularity on SM and the quality of the research. It's posted by Raymond Jang on the A Rich Life website (not behind the paywall).

Raymond is a holder of CAT - although evidently with less conviction than he may previously of had.

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#Tom Bogan joins board
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Last edited 3 years ago

The announcement of a new independent director isn't usually a factor for me, but Catapult's latest appointment seems noteworthy.

Tom Bogan (linkedIn profile here) will join Catapult's board from tomorrow. He's got an impressive CV, acting as the current vice-Chairman of Workday, former CEO of Adaptive Insights and former partner at Greylock. All of these are huge success stories in the US.

Given Catapult's North American focus and opportunity, it's great to be able to tap into that experience and no doubt a valuable network. In fact, he's heading up a new SaaS Scaling Committee specifically created for this purpose.

I don't want to oversell it -- i'm not changing my valuation or anything -- but I do think this is quite encouraging. Someone like that virtually has their pick of board spots, so to pick a relatively tiny Aussie company suggests he sees big potential (Workday does 40x CAT's revenues).

If Catapult can continue to show cost restraint and a rebound from the covid-induced slump, I suspect it will be due for a re-rate by the market.

FY21 will be a rather ordinary year given the weak first half and the lingering covid situation in the US, but i'll be pleased so long as there's some good indications the sales trajectory is returning to a 15-20% range. If not, it'll prompt a rethink.

ASX announcement here

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#FY21 Results
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Last edited 3 years ago

Catapult looks to have finally turned a corner, despite the disruption of covid.

Others have outlined the metrics, and you can dig into more detail in the company's presentation. But for me the standouts include:

- Strong ACV growth, with good potential in the US market

- 16.7% Increase in multi-solution customers (there's a good way to run here)

- Improved margins and ongoing cost discipline

- Second consecutive year of positive free cash flow

- Strong balance sheet

- Continuing success in transition to (higher margin) subscription model

- Prosumer holding up despite pullback in marketing

- Growth in the final quarter is a strong leading indicator post covid

 

As capital sales effects continue to tail off, I think the company can return to attractive top-line growth -- likely 15-20% in the medium term. For a business on the cusp of profitability, no longer burning cash, with the potential to reap attractive scale benefits, a market leading position and a long growth runway, the current price to sales of 4.6 seems cheap in the context to other SaaS oriented businesses.

It's been a wild ride, but continue to hold and see value.

 

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#Business Model/Strategy
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Added one year ago

Is CAT a beneficiary of WSP Ann yesterday where they released a statement re trimming the fat that results in a profit, price shot up 30%.

given the low multiple CAT trades on and recent Ann of staff cuts I wonder if market thinks they have a similar outlook. CAT up 11% on no news that I can see.


disc: own a tiny parcel IRL

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#Bear Case
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Added one year ago

Thanks @Magneto for the summary. Your first paragraph says it all.

Catapult Capital Raise History – Raised Approx. $197.5m since December IPO 2014, today CAT market cap is $178.2m (Closing Price $0.73 Dec 2022)”.


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#Bull Case
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Added 11 months ago

Have held CAT for quite some years now, averaging down along the way. Viewing the CAT CFO SM meeting was a good reason to re-review the position with CAT. I now better understand the moat and like very much, the "integrated wearables and video" strategy positioning, and the traction it seems to be getting. The Journey diagram made much more sense when verbalised and that helped crystallise further what CAT is all about.

My notes from the CFO meeting is at the bottom of this straw. In reviewing the 1HFY23 results and the recent announcements, the story of recent history/challenges, the changes and the traction since, all make sense to me.

Disc: Have initiated a SM position, held IRL, topped up IRL today.

INVESTMENT THESIS

  • The CAT “turnaround” seems to be well under way and the fruits are now starting to be reaped
  • Clear mission to give Customers a data-led advantage to win - the technology is only the means to achieving the end goal of Suggestive/Prescriptive Insights to enable Recommended Actions to be taken
  • The company has pivoted sharply to its strategy of integrating wearables AND video to enable customers move up the maturity curve to improve analytics insights - from the key metrics, this is resonating with customers
  • The moat:
  • 2 flywheels in play (1) the competitive edge that the CAT ecosystem of wearables and video gives to teams creates its own ongoing demand - teams will need to get onboard to firstly neutralise the CAT advantage, then to win with/from it (2) the constant innovation required to improve the technology is not only internal to CAT but is also driven by leagues/teams who are prepared to experiment and be leading edge - these technology improvements can be exported to other leagues/sport, which provides further league-level demand. Both these flywheels complement each other, putting further distance with CAT’s competitors.
  • CAT is 5x the size of its competitors - it has huge first mover advantage
  • The hardware and software technology, the algorithms - these are contractually protected with CAT having the right to veto any monetisation of the data to 3rd parties created by the CAT ecosystem
  • CAT appears to be the first to market to aggressively focus on integrating wearables and video into a single platform, which becomes a success-critical tool and an integral part of how a sports team actually functions on a day-to-day basis
  • Continued innovation of both software, hardware, algorithms etc - the release of the Vector T7 wearable device in Mar 2023 is a good example
  • The positive Up-Sell/Cross statistics in the 1HFY23 results and in Hayden’s comments below provide good confidence that CAT’s strategy is resonating with their Customers - many paths to create ACV growth (video to wearables, wearables to video, expansion of sport codes within a customer, expansion of use of CAT to lower tiers of a team etc)
  • There is laser focus on getting to free cash flow by FY24, the Company is clear on what drives cash flow burn, have identified and pulled the levers to reign in cash flow burn in the past 6M - hard decisions have been taken and the hard yards appear to behind the Company
  • There is very clear written language that CAT does not intend to tap the market for equity capital - debt facilities are in place to cover any shortfalls
  • All key metrics of Revenue, ACV, ACV Churn, Future Revenue Under Contract, Product Integration Cross Sell/Up sell have shown good upward trajectory
  • Business is mostly recession proof - CAT’s products are a small part of an Elite team’s budget, sport and training must still continue even during complete lockdown periods during Covid


Risks

  • Poor execution of the strategy resulting in inconsistent trends in the key revenue/customer/ACV statistics - LOW, given current trajectory, but this can change
  • Appearance of a credible competitor, which has similar scale - LOW, unlikely in the intermediate term given the size of Cat, relative to its competitors and the flywheels in play
  • Executive churn that causes a distraction, change in strategy etc - MEDIUM, Hayden Stockdale, the CFO has left, so this is a distinct possibility
  • Cash flow burn that goes against the plan to free cash flow and there is no immediately apparent fix to address the cause - if this requires capital raising (again), this would be thesis breaking - LOW, given clear articulation of cash flow burn drivers, work already done to reduce excess costs, debt facility
  • An acquisition that does not enhance or accelerate the clearly articulated go-to-market strategy - LOW, can’t see an acquisition being contemplated at this stage given the focus on getting to cash flow positive, the disruption this will cause to the execution of the strategy


Notes of Strawman Meeting with Catapult CFO Hayden Stockdale on 31 January 2023

12M COMPARISON

  • CFO and CEOs Will Lopes entered the business ~3 years ago and have transformed CAT completely
  • Vision is intact, execution against that vision was the focus
  • Vision is to be the “Salesforce of Sport” - own the sport and software platform/technology to enable teams, coaches, athletes and leagues to maximise their performance
  • Focus has been on growing the platform:
  • Historically, this has been about the wearable devices - going very well, about 5x the size of the competitors
  • Under penetrated eg. NBA Basketball - only 3 teams are customers but of these 3 teams, 2 are CAT customers
  • Growth rates ~30%
  • Video offering has low growth - 5-6% - how to bring this to be on par with the growth rate of wearable's
  • SBG acquisition 1.5 years ago was intended to expedite the growth of video
  • Signs are very positive, buoyant


JOURNEY OF IMPROVING SPORTS ANALYTICS INSIGHTS

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  • Stage 1, Descriptive Raw Data, provides the basic What, When, Where, Who - wearables gives these basic data of what has happened
  • Market today is mostly in Stage 2 - Descriptive Data Analytics - draw actions from inferences
  • Currently, use visual interpretation of video to make informed conclusions of what happened
  • CAT was first in the market ~1 Year ago to bring together wearable and video data
  • Ability to tell coaches why certain things happened in minute detail vs the benchmark of what a player can achieve - this takes the guesswork out of the analysis as objective data is used vs subjective inferences
  • Enables getting to predictive mode as (1) have data-driven understanding of the athlete and (2) the data to predict the likely performance outcome for a single athlete in a single game
  • This in then run through simulation to provide a recommendation on best team, best players etc - moving the capability to Suggestive, Predictive insights and recommended actions - can choose players likely to achieve the required outcomes
  • Key to achieving this advanced level of insights is the tight integration between wearables and video offerings and have them work together in a single, seamless platform


WEARABLES

  • 5x larger than competitors - difficult for competitors to beat as (1) CAT is strategically critical to the team (2) have more data from more athletes where data insights is critical
  • 20,000 teams market - have 3,000 to 3,500 of these teams - expect to penetrate further
  • Confident to win on a day-to-day basis
  • Wearables is the holy grail and cash cow - will not compromise this dominant position


VIDEO

  • Challenge whether CAT can grow here
  • To attain the deep insights, need to marry up wearable data to video, then sell video


CASHFLOW AND CASH SPEND METRICS

  • Still significant $ invested in wearables and investing heavily in video
  • Can scale back investment in videos, teams and peripheral products
  • Margins are high - Video ~90%, Wearables ~80% - can grow EBITDA at margins of 40%
  • Key metrics - slice of market and growth - invest in markets which are big enough
  • Cash flow positive target will be for the full financial year, given the seasonality of the business (see below)


SALES APPROACH, PRICING

  • New customers, the key priority, especially customers who do not have wearables
  • Then cross-sell video into wearable customers - integration of both these products is the driver
  • Up sell can come in multiple ways (1) expand from elite team to entire teams (2) mid-tier product, sell top tier products (3) in Universities, start with 1 sport, then expand to different sports
  • Key Sales Metrics: (1) addition of new customers (2) addition of new logo’s and (3) whether can convert wearable customer into a video customer
  • Pricing Power - well aware that CAT has pricing power but have not pulled the trigger
  • Philosophy - want to overwhelm the customer customers with products and the value that it adds before raising prices
  • Competitors in video raised prices during Covid - clear visible pushback from Customers who looked to move away
  • Will pull the pricing trigger for existing customers in the “right way” - working with the customer, manage expectations, arming the sales team with the right tools etc
  • For new customers, contracts now include automatic renewal and annual price increases built in


TREATMENT OF REVENUE

  • Hardware and Software are treated as a “single performance obligation” revenue as one does not work without the other
  • As contracts are now fully subscription, revenue and costs are recorded monthly, over the life of the contract
  • Cost of sales is taken up upfront - this is a conservative approach
  • When a product is sold to the customer, the hardware component is amortised in the balance sheet from inventory through the life of the contract instead of a lump sum hit to COGS
  • Hardware devices which break are replaced as part of the subscription contract - extent and rate of device breakage varies from sport-to-sport, depending on the extent of player-to-player contact, the higher the contact, the higher the incidence of device breakage


SUPPLY CHAIN ISSUES

  • Impacted about a year ago - price of hardware went up as much as 20% but have since come back to normal - these price increases have been called out in the results when they occurred


BUSINESS CYCLE

  • CAT is a very seasonal business
  • Sports teams operate on a 12M basis - On Season and Off Season - buying only occurs in the Off Season
  • Based on this, cannot look at business performance on a month-by-month basis but rather to assess performance on a rolling 12M basis
  • World Elite sport is counter-cyclical and essentially recession-proof:
  • recessionary pressures directly impact the bottom tier teams which face budgeting pressures
  • during Covid, elite teams were hurting very badly - not playing, no revenue etc, but were (1) well funded (2) the CAT subscription was only a very small portion of the overall budget and (3) still needed athletes to train - very little impact
  • Junior teams were badly impacted


COMMENTARY ON CAPITAL

  • SBG deal in July 2021 was a critical deal - quality of software, new customers and the ability to accelerate video - very confident this will be a company-making deal
  • XOS deal in 2016 was a”stroke of genius” - enabled wearable into video, the challenge was that execution and implementation of the acquisition was executed poorly
  • Smaller acquisitions were more of a distraction than value adding
  • Market is “dislocated” - feeling that the company is much, much more than the current share price
  • Have $6m debt facility, recently increased to $20m at better rates - likely to use this facility foe a few months to cover the cash flow effects of the seasonal nature of the revenue
  • Have good support from their existing bankers for additional facilities - no need for this other than for “signalling” purposes


DATA OWNERSHIP

  • Data is owned by the team’s
  • CAT has the right to use the data to improve its algorithms on an anonymous basis
  • Teams do not have the right to monetise the data without CAT consent - this is to ensure that monetisation is not used in a way which competes with CAT
  • Data is not interesting to a 3rd party unless it is for the whole league - teams are more interested in winning, it is the leagues that are more interested in the data as they care about eyeballs, fan engagement etc


NATURE OF BUSINESS AT SCALE

  • Assuming EBITDA of ~40%
  • CAT expects to continue to invest in the mid-teens % in R&D, so EBIT will be around ~25%, post tax NPAT will be 17-18%


COMMENTS ON XFL LEAGUE ANNOUNCEMENT

  • ACV of $0.7-$0.8m, a sizeable deal
  • XFL is a disruptor in wanting to be a data-driven league through technology
  • One of the key reasons why sports technology seem to come out of Australia is the willingness in Australia to experiment with different things - this is a good environment for CAT to grow in - try the new technology locally, then take to the rest of the world eg. Telstra Tracker, which is a world leading capability - XFL is heading towards that with data on scoreboards, fan applications etc.


WHAT MARKET MISUNDERSTANDS ABOUT CAT

  • Lots of loyalty from existing shareholders who understand the technology and the business
  • Struggling to broaden the shareholder audience beyond the current shareholders and finding a way to get new shareholders to look at CAT again
  • CAT has made some hard decisions - move entirely to subscription revenue, timing of capital raises
  • Cost of Sales is still recorded upfront even though revenue is spread across contract lifespan - have not seen this flow through to the results yet
  • Once 20%+ ACV growth numbers translate into revenue growth, expect to get broader support from shareholders


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Valuation of $2.00
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Added 6 years ago
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