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

My notes from the podcast that Will Lopes did with Superhero 2 months ago: https://www.youtube.com/watch?v=QsInF5JqT0M

Discl: Held IRL and in SM

SUMMARY

A good wide-ranging and relaxed 30 min podcast which helps further crystallise how strongly placed CAT is in the market, how the CAT solutions are integral to the ongoing performance success of teams, in its data moat and management approach

Perspective on AI was insightful as to how CAT thinks of, positions and uses its huge data moat

Newest insight for me was the application of the Amazon/Bezos approach/mindset in how Will Lopes runs CAT - he learnt from one of the best, and is applying what he learnt in running CAT - that is a really big tick

RECAP OF SPORTS TECH MARKET

• US$40b market, ~20k professional sports teams globally, CAT has ~4,400 teams as customers, roughly 22% of market
• Growing, last bastion of live entertainment - not many live entertainment options for advertisers to go
• CAT technology is becoming ubiquitous but it still early days
• Biggest competition is not another technology company, but the lack of information/knowledge on how to USE and harness the information from CAT’s tech - a lot of teaching to customers of how look at, and understand the dataset, how to use that to manage athlete workload, improve training session effectiveness, prevent injury, lead up to game day etc

NEW REGION, NEW LEAGUE SELLING APPROACH

• Work with, point to, 1 or 2 teams which are typically successful as use cases eg. Bayern Munich for Soccer, Alabama for College football 
• These teams have long history of winning as they constantly look for new technology that can help give them a further winning edge
• Focus on them embracing what Will calls “objective data” to lead them to winning success

COMMENTS ON “AI”

• Data that CAT collected/collects is very unique and rich
• CAT has collected 5 PETRAbytes of data that is very unique to CAT, is so far ahead of everybody and is not available for LLM’s to learn from - this is a big data moat
• “AI” is becoming increasingly commoditised - the key question is what is the data behind it - LLM’s are only as good as what they are trained on
• Focus is on how to help least sophisticated teams understand:
• How hard a training session was
• What to do with that insight/objective data to plan for the next training day to minimise injury
• Who to put on the team for a future game and what training regime is needed for those players leading up to the game which minimises injury
• How hard to drive players during a game
• Provide a “sports science” answer to teams who do not have those resources
• CAT solves the hardest part of data which is to figure out how the data is correlated - the time to find answers/insights is significantly reduced. Once this is understood, then very little time is spent to work out how to fix the identified problems
• Still need humans to drive the required outcomes arising from the data as the people who need to act are the players - AI cannot replace humans for this
• What CAT is seeing is not less humans, but more specialisation on the data eg. Mercedes went from 1 data analyst working on a spreadsheet to 200 analysts, each specialising in watching a small sliver of the overall dataset and seeing how it can contribute to improving performance
• Focus is on working out how to predict more and more outcomes and the interventions required to achieve those outcomes eg. how to drive a current Academy player to becoming like player x - the platform and data allows coaching staff to make faster decisions

FINANCIAL FOCUS

Nothing new on financial goals - reiterated goals of (1) 20% revenue growth per annum through expanding wallet size, retention of contract value (2) reduce variable cost from current ~52% to 45% (3) sustain fixed cost to 5-7% increase per annum - large investments to scale the platform was completed 3 years ago, benefits now flowing

Doubling of revenue to US$200m is not a matter of how, but when - (1) mid term goal to get 5,000 wearable customers with average contract size of $20k (2) cross-sell video half of that to increase the current 1,000 video customers to 2,500. average contract size of $40k

AMAZON BEZOS MINDSET/ETHOS

Will spent significant time at Amazon, involved in growing the many Amazon offerings - Prime, Audible, Alexa etc, sounds like he had decent and direct exposure to Bezos.

Amazon’s mindset and approach is embedded into how CAT is run:

• CEO focuses 5 years out, so Will is focused on how to get to $1b revenue, no longer focused on how to get to $200m
• Direct reports focus on the next 3 years - the team knows how to deliver $200m
• Operational folk focus on current year

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

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]

Catapult referred to the same “rule of 40” in their recent presentation as Xero. Cash flow much better last update, but not much left in the bank. Interesting that their web traffic is steadily increasing. I assume they have real time data access through their website but would be interested in hearing from anyone who has used their platform. Seems like something that would be fairly sticky once it becomes popular. Bought some based on the above recently IRL.

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.