Sorry to bang on about CAT ... working through the links from a CAT shareholder email communication received today.

Loved this ~1 minute bite-sized videos on how CAT solutions and data are literally, changing the game for teams. It very eloquently reinforces for me, how strong a competitive advantage, data flywheel and hence, data moat, CAT has.

Discl: Held IRL and in SM

Catapult has recently partnered with SportsBall, experts in creating video content to simplify the complex world of sports. By using Catapult’s data, SportsBall is creating a series of bite-sized social media posts explaining the power of data analysis and different ways it is used to gain an edge across a number of different sports around the world. The first posts analyse how far American Football players really move during a game, and how the game of rugby union has evolved to incorporate more data into the sport. 

Episode 1: About CAT, the data flywheel Linkedin

Episode 2: American Football, insights from the distances that players run during a game LinkedIn

Episode 3: Rugby Union, insights from player weights flat-lining, how focus has changed from brawn to brains via data LinkedIn

Board Ownership

Share Holding % Of Issue Net Worth $3.38

Adir Shiffman 10,084,200 3.74% $34,084,596 

Will lopes 1,160,049  0.43% $3,920,966

Shaun Holthouse  14,675,000  5.44% $49,601,500

Igor van de griendt  19,980,000 7.41% $67,532,400 

James Orlando  681,907  0.25% $2,304,846  

Michelle Guthrie  564,658  0.21% $1,908,544 

Thomas Bogan 1,178,430  0.44% $3,983,093 

Total 48,324,244  17.93% $163,335,945 

Current Market Cap at $3.38 = $911,149,270 

Mangement Bio

Adir Shiffman - Executive Chairman 

Dr Adir Shiffman, Executive Chairman of Catapult, has extensive CEO and board experience in the technology sector. Adir has founded and sold more than half a dozen technology startups, many of which were high growth SaaS (software as a service) businesses. His expertise includes strategic planning, international expansion, mergers and acquisitions, and strategic partnerships. Adir currently sits on several boards. He is regularly featured in the media in Australia, the US and Europe. Adir graduated from Monash University with a Bachelor of Medicine and a Bachelor of Surgery. Prior to becoming involved in the technology sector, he practised as a doctor.

Will lopes -Chief executive officer and managing director

As the former Chief Revenue Officer of Audible, an Amazon subsidiary, Will brings world-class technology and growth experience from one of the world’s most successful technology businesses. Will was responsible for revenue growth and was a key leader on the executive management team responsible for overall business performance.

Shaun Holthouse -Non-executive director and co-founder

Shaun co-founded Catapult in 2006 and served as CEO up until April 30, 2017. During that time, he played a central role in developing Catapult’s wearable technology and is the author of many of its patents. Under his leadership Catapult launched and expanded sales into more than 15 countries - including establishing subsidiaries in the US and UK and becoming the dominant elite wearable company globally. Shaun was responsible for raising early capital, listing on the ASX, acquiring GPSports, XOS and Kodaplay (Playertek) and developing Catapult’s strategy to grow from a wearable only company to building out the technology stack for elite sport and leveraging this into consumer team sports.

Prior to Catapult, Shaun had extensive experience in new technology transitioning into commercial products, including biotechnology, MEMS, fuel cells, and scientific instrumentation. Shaun holds a Bachelor of Engineering (Hons) from the University of Melbourne and is a graduate member of the Australian Institute of Company Directors. He is the author of numerous patents and patent applications in athlete tracking, analytics and other technologies. He also works as a professional Director as well as providing advisory services for technology start-ups.

Igor van de griendt - Non-executive director and co-founder

Mr Igor van de Griendt has served as Chief Operating Officer (COO), Chief Technology Officer (CTO) and as an Executive Director before moving into a Non-Executive Director role in July 2019. In his capacity as CTO, he was responsible for providing strategic direction and leadership in the development of Catapult’s products, both in the analytical and cloud space, as well as with respect to Catapult’s various wearable product offerings. Igor also provided guidance and operational support to Catapult’s Research & Development (R&D), software and cloud development teams during that time. Prior to co-founding Catapult, Igor was a Project Manager for the CRC for MicroTechnology which, in collaboration with the Australian Institute of Sport, developed several sensor platforms and technologies ultimately leading to the founding of Catapult. Prior to joining the CRC for MicroTechnology, Igor ran his own consulting business that provided engineering services for more than 13 years to technology companies such as Redflex Communications Systems (now part of Exelis, NYSE:XLS), Ceramic Fuel Cells (ASX:CFU), Ericsson Australia, Siemens, NEC Australia and Telstra. Igor holds a Bachelor of Electrical Engineering from Darling Downs Institute of Advanced Education (now University of Southern Queensland). Igor is also the author of numerous patents and patent applications in athlete tracking, and other sensor technologies.

James Orlando -Independent non-executive director and chair of the audit and risk committee

Mr James Orlando has held senior finance positions driving growth and shareholder value in the United States, Asia and Australia. Most recently he was the CFO of Veda Group Ltd (VED.ASX), leading the company through its successful IPO in December 2013.

Before joining Veda, James was the CFO of AAPT where he focused on improving the company’s earnings as well as divesting its non-core consumer business.

He also served as the CFO of PowerTEL Ltd, an ASX- listed telecommunications service provider which was sold to Telecom New Zealand in 2007. James also held various international treasury positions at AT&T and Lucent Technologies in the US and Hong Kong including running Lucent’s international project and export finance organization.

Michelle Guthrie - Independent non-executive director and chair of the nomination and remuneration committee

Over the last 25 years, Michelle has held senior management roles at leading media and technology companies in Australia, the UK and Asia, including BSkyB, Star TV and Google. She has extensive experience and expertise in media management, and content development, with deep knowledge of traditional broadcasting, the digital media landscape and the transformation necessary to embrace the digital consumer.

From 2003 to 2007, Michelle was based in Hong Kong as Chief Executive Officer of STAR TV, responsible for pay TV platforms and content development in India, China, Indonesia and across Asia. She then spent several years as an equity adviser and investor for Providence Equity covering Asia Pacific from Hong Kong, before moving to Singapore for a senior role at Google Asia Pacific. In her role at Google as Managing Director for Agencies, Michelle developed business partnerships with key global advertising agencies. From 2016 to 2018, Michelle was the Managing Director of the Australian Broadcasting Corporation where she led the transformation of the organization, increasing the efficiency and effectiveness of work across the ABC as well as investing in investigative journalism, regional journalism and innovative Australian content. Michelle holds a Bachelor of Arts and Law (Honours) from the University of Sydney.

Thomas Bogan -independent non-executive director and chair of the saas scaling committee

Mr Thomas Bogan currently serves as a director of several software companies. Until January 2022 Thomas served as Vice Chairman of Workday, a leading provider of enterprise cloud applications for finance and human resources with an annual revenue of over $6 billion for its most recently completed fiscal year. Thomas joined Workday in 2018 following its US$1.5bn acquisition of Adaptive Insights, where he served as CEO. He was also a board member of several public and private software companies including Chairman of Citrix Systems (Nasdaq: CTXS). He was also Chairman of Nasdaq-listed Apptio until its approximate US$2bn acquisition by Vista Equity Partners in 2019. Previously, Thomas spent more than five years as a partner at high-profile venture capital fund Greylock Partners, where he focused on enterprise software investments. He also served as president and COO at Rational Software until it was acquired by IBM for US$2.1bn in 2003, as well as CEO at Avatar Technologies and Pacific Data. As Chairman of the SaaS Scaling Committee, Thomas supports the board and management with growth-oriented SaaS-model innovations.

Interesting article in Livewire today by Ben Richards of Seneca Financial. I hadn't heard of them before. It's a new fund but they have beaten the Small Ords over the past year that it's been running. Anyway, it's a decent read on takeover plays in Aussie small caps and he makes a thought provoking argument below for why Catapult is an attractive option.

Catapult Group International Ltd (ASX: CAT)

Catapult Group International is a global leader in sports technology and analytics, specializing in wearable devices and video solutions that monitor and analyze athlete performance. Its wearable GPS trackers, famously visible on players across sports like AFL, soccer, and rugby, provide critical data on metrics such as load management and fatigue, while its video solutions offer tactical insights for coaches and teams. By converting traditional intuition-based coaching into a data-driven approach, Catapult has become a must-have tool for professional sports organizations worldwide.

Catapult is poised for significant growth, supported by strong tailwinds in the professional sports industry. The global sports tech market is projected to grow at 17.5% CAGR to $40 billion by 2026, driven by increasing media rights values, the rise of sports betting, and growing fan engagement through social media and streaming platforms. With only ~21% penetration of an addressable market of ~20,000 elite teams, Catapult has ample runway to expand its user base and cross-sell products. Emerging trends such as the professionalization of college sports, rising investment in women’s sports, and integrated video-wearable solutions further amplify its growth prospects, positioning Catapult as a key beneficiary in the fast-evolving sports landscape.

We mentioned CAT as a buy to our Good Research subscribers when the stock was trading at $1.96 just 3 months ago. With shares now trading +88% higher today, and +53% since we wrote this article on Livewire, the thesis is still largely unchanged.

Synergies:

We see Catapult as a global sports tech platform that can be scaled up significantly into a large addressable market. Data is the new oil, and Catapult holds the key to professional athlete performance data.

Acquiring Catapult unlocks synergies through product integration and cross-selling. Catapult’s wearable technology and analytics tools can be combined with an acquirer’s platforms to create comprehensive solutions, while its global client base provides opportunities to cross-sell and expand into sports media, ticketing, or fan engagement markets. Integrating Catapult’s player data into broader ecosystems can enhance customer experiences and generate new revenue streams.

The acquisition offers cost efficiencies through streamlined operations and supply chain optimization, while a larger acquirer could scale up Catapult’s R&D budget to accelerate growth through new product development. Catapult’s data can also drive advanced AI tools for injury prevention, performance forecasting, and tactical insights. With a strong presence in elite sports and opportunities in grassroots markets, the deal positions the acquirer as a leader in sports analytics, strengthening their competitive edge and growth potential.

Scarcity:

Opportunities to gain exposure to the rapidly growing professional sports industry are exceedingly rare, particularly in public markets and even more so in Australia. In the US, assets in this sector are scarce and often held by private equity or billionaires as trophy investments. Catapult stands out with a strong, hard-to-replicate market position, underpinned by proprietary technology in wearable athlete trackers and video solutions for coaches.

Over the past decade, Catapult has built and acquired a comprehensive suite of software and wearables, establishing a robust network of professional organizations that would be difficult to replicate from scratch. Now entering a cashflow harvesting phase, CAT presents an attractive opportunity for financial investors seeking exposure to the professional sports sector.

Gettable:

CAT has an open register, with the board holding approximately 17% ownership. This substantial stake reflects strong alignment with minority shareholders and suggests that any potential takeover would likely require board approval, ensuring shareholder interests are well-represented.

Cheap:

CAT is currently trading at 4.9x EV/Sales, with a robust ~20% annual top-line growth and impressive 75% incremental profit margins. The business also offers significant growth optionality, with new products like the NCAA sideline video tools yet to be reflected in sell-side analyst models. Additionally, the potential to secure a major deal with the NFL represents a substantial blue-sky opportunity.

Given the valuation benchmarks for software companies, we believe any acquisition would likely occur at a multiple of at least 6-8x EV/Sales. Factoring in a reasonable takeover premium, this could propel CAT’s valuation to over $5.00 per share.

Who might buy it?

Private equity firms, such as Silver Lake (City Football Group, New York Knicks), CVC (rugby leagues, Formula One), and TPG (tech/media interests), are likely contenders, drawn by CAT’s market-leading wearable technology, recurring revenue streams, and opportunities for operational efficiency and bolt-on acquisitions. With CAT under-geared and trading on just 5x EV/Sales, private equity buyers could leverage its strong market position to scale growth and enhance profitability.

Global technology giants like Apple, Google, or Microsoft might also see strategic value in Catapult’s player-tracking and analytics capabilities. Integrating this technology into their health, fitness, or AI ecosystems could enhance their platforms and deepen their reach into professional sports. Similarly, sportswear and equipment manufacturers like Nike, Adidas, or Under Armour could embed Catapult’s solutions into their wearable products, offering athletes and teams a complete performance ecosystem.

Additionally, media and entertainment companies such as ESPN, DAZN, or Fanatics could utilize Catapult’s analytics to enrich broadcasts and fan engagement platforms. Whether through data-driven insights for viewers or enhanced performance metrics for athletes, Catapult represents a scarce, high-value asset in the growing sports technology landscape, making it attractive to a wide range of strategic and financial buyers.

Why now / what's the catalyst?

CAT's profitability is inflecting, and it's entering an attractive cash flow harvesting phase, demonstrating strong operating leverage in its recent financial performance.

The key metric to call out from CATs recent 1H25 result was its exceptional incremental profit margins. The company achieved an impressive 75% incremental margin in the first half of FY25, well above its medium-term target of 30%. This reflects strong profitability from newly signed teams and product sales. Notably, this performance builds on incremental margins of 43% in FY24, a significant improvement from 19% in the first half of that year, underscoring CAT's growing operational efficiency and ability to capitalize on revenue growth.

A key catalyst for CAT is its looming inclusion in the ASX200 index. With its market cap now at $1.0 billion, CAT is nearing the ~$1.2 billion threshold for inclusion in this premier index, tracked by passive ETFs and institutional mandates. Such an event could drive significant upside, as seen with other high-performing ASX-listed technology shares like Pro Medicus (ASX: PME) and Wisetech (ASX: WTC), which have re-rated to P/E multiples of 204x and 97x, respectively. These stocks benefited from strong capital flows and their scarcity as tightly held, high-quality tech shares on the ASX, particularly following the exit of Altium after its takeover (~50x EV/EBITDA).

This is the link to the full article if you're interested - https://www.livewiremarkets.com/wires/the-4-common-traits-of-small-cap-takeovers-and-our-top-8-targets-for-2025?utm_medium=email&utm_campaign=Trending%20on%20Livewire%20-%20Wednesday%204%20December%202024&utm_content=Trending%20on%20Livewire%20-%20Wednesday%204%20December%202024+CID_d3a295bfd0e137ce6b1c2dcb34f0da8f&utm_source=campaign%20monitor&utm_term=ACCESS%20THE%20INSIGHTS

From 22 Nov 2024 on Livewire, commentary from Forager's Steve Johnson. Interesting that CAT is now a 11% position in the Forager Aust Shares Fund - that can only be high conviction! The "transition from illiquid small cap to widely held growth stock is well and truly underway" comment was an angle I had not given much thought to, but augurs well for more upside ...

Discl: Held IRL and in SM

----------------

Catapult Group International (ASX: CAT) is the largest investment in the Forager Australian Shares Fund. Its half-year results justified our optimism.

It was a result difficult to fault and there is no obvious impediment to Catapult’s momentum. Its customers, professional sports teams, are growing in number and size. Catapult continues to take share from its rivals. The best part of the recent result was the accelerating growth in its newer video segment, where Catapult faces more robust competition (the main wearables business is five times larger than its nearest competitor). It is now generating positive free cashflow and has the capacity to invest heavily in product development alongside its margin expansion. We anticipate it growing at about 20% per annum for some time to come.

Our thesis is well and truly on track. The only question is valuation. Catapult’s share price has tripled over the past 12 months, taking its market capitalisation to a touch over $900m (US$585m). We have been buying all the way up and, after the past week’s share price appreciation, the Forager Australian Shares Fund’s weighting is above 11%. That is a large percentage of the portfolio, even by our concentrated standards.

Firstly, on valuation, we still think it stacks up. On our numbers, the business can generate nearly US$200m of revenue by financial year 2028 and over US$300m by 2031. By then it should be doing 30%+ margins after share-based compensation and, fully taxed, generating something like US$80m in net profit after tax.

It will matter a lot how much growth remains ahead of the business at that point. Even if the growth has slowed, it should still be worth 20 times earnings. If it’s still growing 20% per annum, it could easily be a 40 multiple. This is a global growth stock. That would give Catapult a $2-4bn+ valuation and could place it inside the ASX 200. Obviously, the high end of that range is an optimistic scenario and there is plenty that can go wrong between now and then. But Catapult can still be a good investment on much more modest assumptions. And, in the near term, we are willing to risk a higher weighting than normal while the rest of the market gets its head around this business.

In the five trading days since Catapult’s half-year result, over $80m worth of shares have traded. That’s more than the prior 40 trading days combined. Despite its $900m market cap, this is not a widely held stock among Australia’s larger small-cap managers (most likely due to prior disappointment). They are likely to get on board now that the business is profitable and the stock liquidity has improved. Bulge-bracket research firms are likely to commence coverage and Catapult should qualify for inclusion in the ASX 300 index next time changes are announced, bringing passive index buying to the market.

In short, the transition from illiquid small cap to widely held growth stock is well and truly underway. We won’t let it become irresponsibly large, but are willing to tolerate returns volatility while we capture as much of the near-term upside as our risk tolerance allows.

Impressive results from whichever angle! I really like the transparency that management have provided in terms of its targets, across the Board. This has really helped in managements narrative as to how improvements in the operational KPI's lead to other good things - the story could not be any clearer for me.

I prefer to compare the results Half-on-Half instead of YoY to gauge ongoing momentum, as there was already a sharp step up from 1HFY24 to 2HFY24. The HoH comparison clearly shows the ongoing momentum across all the key metrics but does temper the achievements a bit. A few things to call out from a HoH perspective:

• Lifetime Duration improved by 0.6 years, a 8.6% improvement
• Multi-Vertical Customers was up a whopping 47.3% - this is good evidence that the Expand Go-to-Market approach and integration with video is really kicking in
• Free Cash Flow was up 50% HoH
• Rule of 40 increased by 5% - this is really good to see following the 6% increase from 1HFY24 to FY24
• Revenue was up 14.6% but expenses only went up 9% - cost control has been sustained - a good sign of things to come
• Tactics & Coaching revenue spiked 31.1% but margins are lower in this segment, hence the 4.1% fall in margin HoH - one to watch out for
• Variable Cost % on Revenue actually went up from 52.2% in 2HFY24 to 52.4% - still bloody good, but it does make the dip in the ratio from the slide pack, which compares YoY, less bullish. The next 7% to get to 45% will be the hardest as the easy steps have already been taken, so I expect this ratio to only marginally drop HoH from here.

CAT Is absolutely firing on all cyclinders but there is still a lot to come. This is my favourite slide that shows the promised land:

It was also good to see the Capex taper off - Will did say a lot of the hard technical platform work was done to enable scale, in the early months of his coming onboard. This is now payback time!

Onward and upward!

Discl: Held IRL and in SM

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

2229 GMT - Catapult's contract with England's national and top-tier rugby teams shows the Australia-listed sport-tech provider delivering on its cross-sell strategy, Jefferies says in a note.

Analysts point out the deal represents the first major publicized contract for both Catapult's wearable and video products.

They also see Catapult's unseating of a long-term incumbent as a positive.

Catapult is scheduled to report its 1H result next week. Jefferies anticipates an 18% rise in revenue, a 19% rise in gross profit and free cashflow of US$4.8 million.

Jefferies has a last-published buy rating and A$2.40 target price on the stock, which is at A$2.73 ahead of the open. (stuart.condie@wsj.com)

(END) Dow Jones Newswires

Decided to investigate the small 4.8% pop in CAT today after reading mumblings about a English Rugby Union deal. This looks to have driven the pop, but the only ASX announcement from CAT today was details of its results announcement.

Perhaps this was a non-material contract value to not warrant an ASX announcement, but it did seem to me that it broke new customer ground and looks pretty all encompassing. Cricket is my game, so do not understand the significance and standing of these organisations in the Rugby Union world.

But not a bad place for a shareholder to be in if deals like this is now "non-material" and BAU!

Discl: Held IRL and in SM

English Rugby Deal

Catapult Signs New Multi-Year Deal with the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby

October 30, 2024 at 04:00 am EDT

 Share

Boston, MA, Oct. 30, 2024 (GLOBE NEWSWIRE) -- Catapult (ASX: CAT), the global leader in sports technology solutions for professional teams, today announced a new deal with the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby that will bring Catapult’s innovative athlete monitoring technology and video integration to rugby union in England. The strategic partnership marks a significant milestone in advancing athlete performance with the national England men’s and women’s rugby teams, Premiership Rugby, and Premiership Women’s Rugby.

As the preferred provider of athlete monitoring technology, Catapult will make available to the men’s and women’s national teams, Premiership Rugby, and Premiership Women’s Rugby teams its full performance analysis suite, including the Catapult Vector System, offering a comprehensive understanding of both team and individual performance. The integration of Catapult Vector with MatchTracker gives coaches a detailed visualization of on-field dynamics, allowing them to sort, filter, and rapidly access insights enabling practitioners and coaching staff to identify patterns and trends in player performance. Additionally, Focus captures multi-angle video and data during games and practices, enhancing decision-making and tactical adjustments. Together, these tools will empower the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby practitioners and coaches to make informed choices on strategy, athlete performance, and injury management.

The agreement also includes the Catapult Vector Rugby Analytics Suite, Elite Vests with integrated heart rate, and ClearSky Local Positioning System (LPS) to further enhance player performance tracking and analysis. The Catapult Vector Rugby Analytics Suite is specifically designed for rugby, employing advanced algorithms to monitor key actions such as scrums, kicks, lineout jumps, and contact involvements. The Elite Vest for women athletes optimizes sensor placement for improved heart rate signal quality, while the Elite Vest for men athletes enhances fit and data accuracy with an inlaid chest band that stabilizes sensors during intense movement. ClearSky LPS will be installed in national team venues including the Allianz Stadium and Honda England Rugby Performance Centre in addition to a number of domestic training venues including for teams such as Bristol Bears and Gloucester Rugby providing low-latency, real-time data during training and matches.

“We are excited to begin this new partnership with three of the world’s most respected rugby organizations, the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby,” said Kieran Dannatt, Vice President of Strategic Partnerships and Development of Catapult. “By investing in Catapult’s technology, the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby are building a sustainable model for the future of rugby. This partnership ensures that the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby teams have cutting-edge technology that enhances both team and individual athlete performance and player care, further solidifying English rugby’s position as a leader in rugby innovation.”

With Catapult, the Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby will gain significant advantages in data management and sharing across club, league, and game levels. Each national and domestic team using Catapult will establish its own performance thresholds and operational zones, enabling tailored training strategies throughout the season. This data will seamlessly synchronize with the league’s and domestic team’s overall data architecture, enhancing information flow and improving insights across all levels of rugby. Additionally, Rugby Football Union, Premiership Rugby, and Premiership Women’s Rugby players will benefit from consolidating their performance data directly to Catapult OpenField Cloud. This integration will enable enhanced performance analysis, strategic planning, and collaboration across teams, leagues and the National Governing Body.

“It has been a long-time objective to align player tracking technology across all areas of the professional game,” said Duncan Locke, Head of Technical Performance at the Rugby Football Union. “The partnership between the Rugby Football Union, Premiership Rugby, Premiership Women’s Rugby and Catapult will provide players and practitioners access to a range of best in class products to optimize how players are managed and drive game-wide insights through standardized data capture and integrated data and video analysis. Utilizing Catapult ClearSky technology we can now monitor performance with unprecedented precision. This not only elevates individual and team performance understanding, but also supports player management through consistently and efficiently capturing and monitoring player workloads and movement patterns across all club and international environments, aligning with the Rugby Football Union’s commitment to player welfare and safety.”

”Premiership Rugby is excited to partner with Catapult Sports, making available the latest player tracking technology to our teams,” said Matt Cross, Head of Science and Medical Operations at Premiership Rugby. “By providing practitioners with comprehensive and individualized data using Catapult technology, we empower them to make informed decisions to prioritize player performance and safety. It has been a long-term ambition to align player-tracking technology across the elite game in England, and this partnership provides the opportunity to make this technology available to clubs, allowing for seamless data sharing to support players transitioning across different environments from both a performance and welfare perspective.”

“As a player, having access to detailed performance insights like this is a game-changer for us and ensures every player in Premiership Women's Rugby can operate at the highest level," said Marlie Packer, Co-Captain for the Saracens Women. “Catapult athlete monitoring technology will allow us to track our progress, manage our workload, and refine our skills in ways we couldn’t before as we play in the best women's league in the world. It’s exciting to know that we’re supported by tools designed to prioritize both our performance and our long-term health. This partnership is helping us elevate our game and align with the highest standards in rugby.”

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!)

I'll upload the recording shortly, but just wanted to get some key thoughts down while they are still fresh.

• I very much got the sense that Will is playing the long game, and is (rightly) not afraid to make investments where needed -- even at the cost of near term profitability.
• The SBG acquisition and re-tooling of the full product set to use that as the underlying platform is a great case in point. As discussed, that couldn't have been an easy sell given the financial profligacy of the former management and the demands of the market at the time, but it has established a firm technological foundation for the business that will enable more efficient product management and enhancement
• To be clear, that investment is largely done now.
• There remains a lot of opportunity in other adjacencies, but Will said that for the next 2-3 years the focus is on prosecuting the existing opportunity which is showing strong traction.
• fwiw, he reckons Catapult could be a billion dollar revenue company in time (a 10x from here) -- although wise to take that with a grain of salt. It has the potential, but there's a lot of work ahead to get there.
• He's not competing on price, and that seems to be how StatSports tries to differentiate itself (according to WIll). He mentioned some teams that had left Catapult for the cheaper solution, but had since returned to Catapult.
• Since he started he's been very consistent in his vision and strategy -- shifting to subscription, building a firmer base and a more holistic offering and (importantly) ensuring some operating leverage is realised. The company now retains a 46% of every incremental dollar of sales. So, in theory, we should see profit growth exceed revenue growth. The medium term target is a 30% profit margin.
• In wearables, he thinks the company can, in the medium term, win 5,000 teams (out of an estimated 20k globally) and that each team pays US$20k per year just for wearables. So that's a US$100m revenue opportunity in wearables alone. They've said elsewhere that 50% of these should also adopt the video solution.

All told, a great product in a fast growing and under-penetrated market where they remain the dominant player, with lots of future optionality and (finally, hopefully) a robust and scalable business model. Importantly, the company looks to be sustainably past the breakeven inflection point

Shares are on ~3x revenue, but on a 15% net margin (they are targeting 30% operati8ng margin in the medium term) you'd be looking at a PE of ~20.

[Held]

@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.

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

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."

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.

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

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.

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

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!

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).

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.

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

• 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

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?

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]

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

CAT will be cashflow positive........in FY24.

The most frightening implication of this announcement is that there was some possibility that they wouldn't be FCF positive in FY24. Are management tone deaf?

The cashflows are too far out for my liking and I have very little faith in my ability to forecast what those cashflows might be. Really hard to tell what "capex" is actually capex IMO.

Does someone still have a differing view on CAT?

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.

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.

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.

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.

Looking through the results today, few thoughts. I hold this in RL

• Strong revenue growth
• Fully funded (should be OK I think)
• Still think they have a quality product
• Second growth engine with Tactics & Coaching (still to be seen)
• Results look worse due to a few one-offs with SGB acquisition
• Ramped up spending on product development and marketing
• Still flagging acquisitions as part of strategy (would prefer they didn't)

Generally think no rush to buy this one if you don't hold. They need to execute on their strategy - I think if tactics & coaching segment actually delivers then I would add to my position if not they might be in trouble.

Hopefully from my perspective the depressed share price makes them a bit more disciplined in their spending and they don't chase any acquisitions. They have enough balls in the air without trying to do add more products imo.

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)

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.

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...

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. 

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.

Building on from the recent German league wide expanded deals. CAT has made further announcements involving expanded league wide deals with the AFL (31/3) and NRL (7/4). Specifics regarding the full details of the announcements can be found at asx.com.au.

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

This morning's announcement:

CATAPULT EXTENDS RELATIONSHIP WITH CHAMPION DATA TO DELIVER PERFORMANCE TECHNOLOGY TO THE AUSTRALIAN FOOTBALL LEAGUE (AFL)

MARCH 9, 2022 Catapult Group International Limited (ASX:CAT, ‘Catapult’ or the ‘Company’), the global performance technology leader in elite sports, is pleased to announce that Champion Data has expanded its relationship with Catapult in an exclusive, three-year deal to supply performance analysis solutions to the AFL. For the first time, teams across the AFL, AFLW, and AFL Pathways will use Catapult's Vector SaaS technology to empower data-driven decisions to improve player performance, quantify decisions to help prevent injuries, and inform return to play. This is also the first time Catapult's ClearSky system will be installed and used across nine AFL stadiums during live matches. The deepening of the relationship, makes it the largest league wide deal globally in terms of performance technology software, both on a player level as well as in stadium with ClearSky installations and is a testament to the strength and longevity of the relationship between Catapult and Champion Data and the AFL. Catapult has been the performance technology supplier to Champion Data to deliver athlete tracking services to the AFL since 2015. Their mutual commitment to research and development has played a pivotal role in assisting the AFL to stay at the forefront of innovation and adopt leading-edge technology to optimize and drive continuous improvement in player and team performance. Starting with this new deal, Catapult’s Vector SaaS technology will help coaches and players quantify, with pinpoint accuracy, the immense physical demands of Australian Rules football on each individual player. Combining advanced global navigation satellite system (GNSS) capability with ClearSky local positioning system (LPS), the Vector SaaS technology will provide an integrated and comprehensive view of performance, in real time, leveraging the latest data science to help players and teams find answers to complex performance questions. The installation of ClearSky across an extended network of stadiums, will deliver unrivaled real-time insights that will be integrated by Champion Data to support broadcast commitments, such as the Telstra Tracker, and create a more engaging fan experience during live matches. 

"Our continued relationship with Champion Data to partner with the AFL is testament to the incredible possibilities that are unleashed when our performance technology is used in training and on match day,” said Will Lopes, CEO of Catapult. “We are immensely proud of our Champion Data relationship and look forward to working together to continue to drive the development of AFL athlete monitoring and performance science." Catapult empowers more than 3,425 elite teams around the world with its integrated SaaS platform, providing athletes and teams with a comprehensive view of performance. Champion Data delivers services to sports bodies and the media globally. “Our ability to service an insatiable appetite for sport data content has been key to our ongoing growth and success” said Libby Owens, CEO of Champion Data. “We look forward to working closely with Catapult to continue to push the boundaries on creating high performance athlete data for the AFL." 

---

Source: https://www.asx.com.au/asxpdf/20220309/pdf/456v07h0q5nsn0.pdf

Todays announcement is further evidence that shareholders just want to see the proof in the pudding.

The frequent roll out of announcements that mention very little by the way of numbers are wearing very thin.

The only thing that will satisfy the market is some solid numbers.

The market is hard to please.

You can see all the detail in the latest presentation, but at a high level ACV -- a leading indicator of subscription revenue -- grew 43%, or 30% if you strip out the SBG acquisition. Subscription revenue growth was 29% and churn dropped to just 4.1%. And, importantly, they seem to be having good success with cross selling their various solutions to existing customers; customers with more than one solution grew ~50%.

The business was free cash flow negative for the half, as it doubled its spend on R&D, and it didn't offer any FY guidance. Revenue grew only 13%, and remains below where it was in H120 (normalised for the change in accounting periods and SBG acquisition), and the statutory loss widened from 4m to 10m.

However, the ongoing switch to a subscription model (which is getting closer to complete), was always going to limit top line growth during the transition. Once complete, you'll have a business with better economics and a closer match between ACV growth and revenue growth. And given the market opportunity, the increased cost base (largely employees and marketing) is not unwarranted.

The business remains very well funded with essentially no debt and US$42m in cash, and has positive operating cash flows.

While there's a few hairs on this one (eg the ongoing statutory losses, poor historic cost discipline, and a past reliance on fresh capital from shareholders), you have a genuine market leader in a fast growing space whose underlying subscription sales are growing a solid double digit rates -- and all for ~3x sales.

Should the underlying trend in core metrics continue, it seems there will eventually be a re-rate from the market (eg a P/S of 5 isnt difficult to imagine given what many tech themed stocks trade at). Who knows when this will happen, and perhaps the business will fail to execute to plan, but the risk reward just seems attractive to me -- more so after today's fall!

I'm probably missing something, so would really welcome the bear case.

I found most of the half year results pretty unhelpful.

The cashflow statement shows that if not for R&D and the SBG Acquisition that FCF would be roughly even versus the prior half year results.

With some scaling it's not too hard to see how this could be trading at a 20x FCF multiple in the next few years but I have no conviction.

Recent announcements have been very promotional in my opinion and the verdict is still out on management.

Will be keen to see others insights.

CATAPULT SUBSCRIPTION REVENUE ACCELERATED TO 29% FROM 3% IN FY21, FOLLOWING STRONG ACV GROWTH OF 43% OVER 12 MONTHS

H1 FY22 HIGHLIGHTS

Subscription revenue growth, the lagging SaaS metric, accelerated dramatically to 29%, up from 3% in FY21, following 12 months of strong ACV growth

Strong progress against key SaaS growth metrics o Annual Contracted Value (ACV), the leading growth indicator, grew 43% with all regions performing strongly o World-class ACV churn of just 4.1% o Continued strong growth in multi-vertical customers which expanded 50%

Recovery from the pandemic accelerated, especially in Americas with ACV growth of 28%

SBG integration & growth is ahead of plan following customer signings in the new markets of Basketball, NASCAR and eSports

R&D grew 94% to 17.2% of revenue, from Covid-related lows in H1 FY21

Accelerated growth initiatives are fully funded with over $42 million of cash at bank.

4532vxwc5c6mz5.pdf (asx.com.au)

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:

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.

Catapult are continuously expanding and creating new markets.

Their most recent announcements include:

• New performance analytics for Ice Hockey Goalie tracking
• Signing the first customer in NASCAR
• New motion analytics in Baseball
• Most recently, entry into the eSports market

The eSports market size is estimated at US$1.7b today and growing to US$3.5b by 2026 (*1) which is a CAGR of 16.3%

The eSports deal is with Motorsport Games (NASDAQ:MSGM) who develops video games for race series such as NASCAR, Le Mans, FIA Formula E, and FIA World Rallycross. You can read the announcement here.

I am becoming more and more impressed by Catapult suite of offerings and the customers they are working with, some of which includes leagues/teams in:

• EPL / FFF
• NBA / NCAA
• NHL
• MLB
• F1 / NASCAR
• AFL
• Rugby

As described in their AGM report, they are the market leader in performance wearables (5x larger than the #2 player) (*2).

They can also provide high performance athlete tracking for non-sports such as the military, police force & fire fighters.

The company is valued at 4x sales which I don't think is a very steep multiple for the quality of customers, industry growth rate and new products/market expansion.

I have added slightly more in my real portfolio in the recent pull back.

References

(1) Marketsandmarkets, Sports Technology Market with COVID-19 Impact - Global Forecast to 2026, April 2021.

(2) CAT Investor Day Report, 09 Nov 2021

Analysts average target price increased to $2.98 according to simply Wall Street. Market Screener seems to agree.

Revenue forecasts are: FY22 104m FY23 125m FY24 150m = 14% CAGR (FY20 used as the base due to Covid effect on FY21).

Revenue per share and Price / Sales numbers (based upon $2.98 target price) are: FY22 45c / 6.6 FY23 54c / 5.5 FY24 65c / 4.6

The analysts are forecasting positive EBITDA of $6m for FY24 but still showing losses at the operating level.

My two pennies worth - Simply Wall Street call this a valuation I think "target" is a better description.

I wouldn't like to guess where it sits in the target but I doubt it will be a bulls eye.