This looks like a sizeable deal -- US$91m for IMPECT, essentially analytics software focused on soccer, which equates to roughly 11x ACV.

That's not an insignificant multiple, but the upfront cost is US$46m, with the remainder contingent on performance targets and paid over four years.

The rationale is that IMPECT adds scouting and tactical insights to Catapult’s existing platform, provides a new upsell opportunity to the current customer base, and is immediately accretive to growth metrics.

CAT is raising US$84m via an institutional placement and up to US$13m through an SPP. With only US$11m in cash pre-deal, the raise was necessary, and given the current share price strength, arguably prudent to raise more than the minimum required.

My initial reaction is that it seems reasonable, even if the multiple is on the higher side. The acquisition strengthens the product suite and leverages Catapult’s distribution footprint. IMPECT’s economics look appealing: ACV has grown at a 68% CAGR over the last two years, and the business scores 73% on the Rule of 40, which is a key focus for CAT.

I wont be participating in the SPP though, mainly because i have a very high weighting already and dont see shares as great value at present.

Slide deck is here

Not a lot of new info in today's AGM speeches, but good to see FY26 guidance reaffirmed. The ACV growth range is pretty wide (15 to 30 percent) but that is fair enough, a year's a long time and hard to predict with precision. Personally, if they hold near 20 percent, I'll take that as a sign of continued momentum.

Also encouraging to see another year of free cash flow expected, and to a decent degree, around US$5 million. Beyond that, it's business as usual: keep signing up elite teams and upsell the full suite of products. That model seems to be working and now in a self funded way.

Catapult-Reaffirms-Guidance,-CEO--MD-Address.PDF

This should hopefully at least mean "no negative surprises" ... otherwise, a really saying-nothing-new statement.

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

Anyone that read my last straw this morning for CAT please disregard that one. I will follow up with a Screen recording instead as I have changed my opinion on it after analysing the chart for the past 3 hours

Not surprised that this company has catapulted up the strawman rankings since the meeting with Will Lopes last week. And the share price is following.

@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

MMM careful here. Its sitting in the wave iv zone and usually w(iv) is extended. Im seeing a possible ABC pattern here which would take use down to the 1.30 ish area. So im still hanging out for an entry Just my opinion.

1hr chart

Helllllo Catapult (a nice update)

Well that one dragged on and approx a week ago I wasnt certain if there would be another small leg down to my anticipated box marked (V) on the charts. I have missed out before getting the bottom, hence why I bought in a start position at the green horizontal line. Glad I did after this mornings move.

You will notice the white horizontal dashed line just above the pink horizontal support line. This is where wave ii should have fallen to historically. It never quite got there, again showing a bullish sentiment and boy has it popped. I expect it to climb to the top of the rising Channel into my wave iii target box and also coincidentally Jefferies Brokerage price target however I'm going to build a bigger position on the pull back to wave iv. I will probably skim off the 10% or so profit @ wave iii however I will leave the original position there for the add too at the wave iv for the next big leg to wave v of wave 3.

Good luck all

Still waiting, the charts since my last update coud be read as we are still in an extended 4th wave down (whiuch can be typical of a 4th wave) with the 5th still to come as i mentioned in my last post or it could even look like its done the 5th wave and is just wiggling about till the market gets a little excited.

I have entered a smallish position already @ 1.255 a week ago and will act further when I see some kind of decent signs to the upside

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

1Day chart

30m Chart

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

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

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

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

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

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

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

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

disc: I hold a very small parcel IRL.

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

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

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

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

Catapult – Can Your Capital Withstand the Siege?

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

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

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

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

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

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

If I were a Catapult Bull I would want:

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

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

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

From dirty rascal to king of the castle?

Interesting recent AFR report and commentary on Catapult:

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

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

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

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

Maybe Catapult will stand the test of time yet.

Fwiw, I am hearing institutional holders of CAT are backed up on the sell side.

Keep in mind instos are typically looking shorter term and can change their mind quickly. But what I am hearing is that the story has grown a little tired and it's maybe seen in the too hard basket relative to others. The growth story and the presentations are perhaps a little messy and not as inspiring as they should be.

The read through is that it is likely going to take some material announcements or momentum to move the dial in the near term.

Just thought I would share.

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

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

disc: own a tiny parcel IRL

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.

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...

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

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.

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)