Sports tech. firm $CAT reported their 1H FY25 results.

My overall assessment - good, steady progress. 1) Good revenue growth 2) Importantly, $CAT achieved incremental profit margin of 75% (which I think is what Will has consistently said the goal is.) and 3) Ongoing innovation, particularly with the sideline video product. Video in T&C is growing very strongly, with strong ACV gains being a leading indicator that this will drive ongoing revenue growth.

Their Highlights

• Annualized Contract Value (ACV), Catapult’s leading indicator of future revenue, grew 20% on a constant currency (CC) basis year-on-year (YoY) reaching US$96.8M (A$143M)

• Revenue increased to US$57.8M (A$85M), +19% (CC) YoY

• The profit margin on the incremental revenue generated reached 75% YoY; delivering Free Cash Flow (FCF) of US$4.8M (A$7M)

Catapult delivered another strong performance from its core SaaS verticals, with ACV growth of 20% (CC) YoY. This reflects the addition of US$10M of incremental ACV half-on-half (HoH), the largest incremental dollar ACV increase in any previous half year period. Catapult’s core SaaS metrics continue to demonstrate the embeddedness of Catapult’s product solutions into team workflows, with:

• ACV Retention consistently strong at 96.2%

• Customer Lifetime Duration increasing 7% YoY to 7.6 years

• Pro Team Customers increasing 7.9% YoY to 3,470 Teams

My Quick Assessment on Cashflows

Continuing good progress. 5th consecutive positive operationing cashflow and 3rd consecutive FCF.

Operating leverage showing through in cash flows: Receipts +21.6% to pcp, Payments +17.4% to pcp, leading to OpCF +34% to pcp.

Investment continues to fall as a % of Revenue.

What's good to see in the chart below is that costs continue to be well-managed, while top-line growth continues. (look at the relative slopes of the dotted blue and orange lines)

$CAT took the opportunity in the period to pay down $6m of debt.

Disc: Held in RL and SM

CATAPULT BECOMES EXCLUSIVE PROVIDER

TO BRAZILIAN NATIONAL FOOTBALL TEAMS

Nice to see management make an announcement and properly not mark it as price sensitive.

Not all our small cap Boards/CEOs quite follow the rules (not mentioning anyone in particular… who might have featured on other posts this morning!)

@Strawman Nice short sharp interview with some great insights.

If you add the 43% profit margin (slide 30 of FY Results Preso and referred to by Will) to the $100m incremental sales for medium term growth, the scenarios are more about does it taken them 3, 4, 5 or 6 years to get there. Then what's the exit trajectory to becoming a $1bn company over the longer term.

You can be sure that once every pro player in every code is streaming data fully integrated with video, then there will be scope for huge innovation for both player, team and audience benefits. Imagine a future where in real time, sports commentators can analyse mistakes and run real time what-if video scenarios. Surely that's not far off with AI video generation? Just think what sport broadcasters will pay to be first with that capability.

I couldn't resist the All Blacks dig, as I only realised in my pre-meeting research this morning over breakfast that they have switched to STATSports. What I learned from Will is that the were stolen by a FREE offer. As @Strawman said, this is a race to the bottom, but it is potentially a dangerous situation if your major competitor makes a FREE offer to the market leader, and then uses that credential to sell into the league. Will said they are leaders in Rugby, but the fact is that 10 out of 20 teams in the 2023 RWC (according to STATSports) use the competitor. Now that's a strong calling card for that code.

Therefore, coming back to long term revenue growth and margin, I wonder how that's going to evolve over time. As the "green space" is filled out over the coming small number of years (we can assume all 20,000 Pro Sports Teams use the tech.,) then product innovation, AI adoption/algorithms is going to be key as the market leaders more often go head-to-head to win accounts and try to switch key accounts.

So, with pricing and innovation as two levers, I wonder how well Will has read the market? This is an unaswerable question, and at the end of the day, you have to decide whether to back the CEO. He has certainly earned some credibility with the calls made over the last 3-4 years.

So that's what's going through my head as I crunch the numbers and think about whether to give this a bigger allocation.

Disc: Held in SM and RL and evaluating

I'm looking forward to reading other SM reports on $CAT today, as I am focused on other things today and won't make the call, but I've just noticed their headlines:

• Annualized Contract Value (ACV), Catapult’s leading indicator of future revenue, grew 20% on a constant currency (CC) basis year on year (YoY)
• The Company hit a milestone revenue mark of US$100.0M (A$152M), up 20% (CC) YoY
• Profit Margin improved +125% YoY resulting in US$4.6M (A$7M) of Free Cash Flow

My quick calculation of FCF is $2.767m (OpCF $31.703 + InvCF -$27.055 + Leases Repaid -$1.972m), however, I've not checked the change in working capital on this.

And of course, this overlooks the hefty non-cash share based compensation element of $9.7m. Which I think means we are being diluted about 4% each year - correct me if I'm wrong.

All that said, the 6-month view below indicates that $CAT has made the transition to a sustainable business. If they can keep on this track. (Note: H2 receipts is seasonally weaker, but look at the cost control. Can they sustain this?)

I recently dipped my toe back in the water with $CAT in RL and SM. I'm still not convinced, so will have to have a harder look at this when I get the time. The slope of my FCF line is promising, however.