As posted about by @Straman & @Gavco, I will try and take more of a cynical view on the news.

Assumptions/factual information;

• $40-$45m price for the acquisition. (20m cash & the rest in performance shares that will be escrowed for 12 months)
• $35m Insto raise & $5m via SPP.

Having a look at SGB, it seems like a perfect fit acquisition for CAT, considering the SaaS products that SGB offer. It now allows for CAT to expand and cover a new industry in motor sports as well as a greater focus on soccer/football.

SGB are a profitable business with 89 customers. THey produced 1.3m EBITDA on $4.5m of revenue, which tells us a few things.

The purchase price of $40m is;

• 8.9 x sales
• 30.8 x EBITDA
• 50 x FCF

Which translates to fucking expensive in qualitative terms. 

I think the acquisition is nice from first principals, but the price paid for SBG reflects this ten-fold.

My instinctive reaction was "Oh shit, here we go again". For those that don't follow CAT, they have had a poor history of financial management and strategic decision making.

Shadowing @Strawman's comments on the new CEO, he has impressed me since coming in and focused the business on becoming self-sustaining in recent times.

I do own CAT shares in my real-life portfolio and for context I purchased at an average price of $1.50.

I would consider my investment thesis broken very quickly if this acqusition burned any more cash than indicated in the presentation.

Annual Report 2021

Note - even though the stock price was up 6% on the day, the result came after market hours.

Please see my attachment for details.

Conclusion;

• Very strong in most unaudited metrics such as ACV, ACV churn and Multi-solution customers.
• Powerful growth in ACV, showing that manegement are executing on up or cross selling to existing customers
• Revenue growth had stalled (obviously due to covid and the closure of sports), though growth has accelerated heading into Q4 21 and FY22.
• The structuring of management renumeration is super attractive, with most compensation awareded based on LTI's and STI's
  • Please - read my notes for much more detail!!

Interested to see the market reaction tomorrow.

DISC - I hold CAT shares.

Dated back to the 24/11/20

Catapult annouced to the market that it had acquired a seemingly small business 'Science for Sport', an online sports learning platform. https://www.scienceforsport.com/

This effectively allows CAT to expand their product mix slightly.

My issue with this annoucement is that not a single dollar or growth figure is mentioned, how much did CAT pay or what earnings does the acquired firm produce.....?

Further research uncovered nothing and i'm not overly impressed by this......If someone knows something I don't then please @ me.

**I own shares in CAT

I recently heard a really strong bull case for CAT on the ‘equity mates’ investing podcast by Andrew himself, where he made some great points.

Year upon year of double digit revenue growth, strong elite revenue growth (core growth) and 75% of CAT’s revenues being on a subscriptions basis tells me that they are marketing a quality, desirable product that its clients are coming back to. Looking at the ‘elite sports’ industry that CAT’s clients operate in, we can see that this market is growing in exposure (particularly English/Spanish/German football leagues), and thus provides an opportunity for CAT to continue its strong revenue growth in the future.

The appointment of the new CEO is a strong point, brought in with the overall aim of achieving cost efficiency in operations, something CAT has struggled with in the past. Hopefully they can pull some of these things into line and limit the need to capital raise again as will preserve enough cash for R&D themselves.

In terms of financial metrics, they have a strong balance sheet and have raised $5m in debt to help with COVID, however they had no debt prior to this. Management still believes they will reach FCF positive by 2021.

**FYI - I am a young investor coming to the completion of my applied finance degree at uni. I'd love for some feedback on my view to help my learn in the future.

The question here is that will COVID have a material impact on the long-term longevity of the business growth. Sporting codes are virtually all closed, however returns dates are being mandated and an overall return is in the near future. Will elite sporting teams still be afford new products such as those offered by CAT? Maybe not.

I’m an avid follower of the English Premier League (EPL) and I am aware of the massive losses in revenues that these clubs have been facing due to a lack of TV exposure, which is where the big revenues are generated. If such clubs cannot afford data analytics tech, then sales growth will indefinitely be hit in the short term but will also impact on revenues in the next 2-5 years. This will subsequently hit CAT’s “reaching FCF positive by FY21” goal pretty hard. The question here is really how sticky are the revenues for CAT and how can they continue to generate sales and earnings growth during this economic turmoil.

CAT released a COVID business update reaffirming their current position.

·         $24.7 million in cash with no previous debt + has just drawn an additional $5m in debt from an existing debt facility to strengthen balance sheet

·         Still aiming to be FCF positive by FY21!!! (they maintain that their “ability to reach positive free cash flow has not been materially impacted.”)

·         They admit Q4 FY2020 sales growth will be negative

·         75% of CAT’s revenue is subscription based, with long term contracts.

·         Weakening AUD will benefit sales (majority of which are in the US)