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$2.28
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3.4%
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#Bull Case
Added 3 weeks ago

Was vegging out in front of clickbait youtube (maybe the hashtag should just be #personalshame), and noted that the PLAYR GPS tracker showed up on 12 Coolest Gadgets That Are Worth Buying. Video has 70k views. Not convinced this is any kind of signal (significant or insignificant). But nice to see it getting noticed. 

Tried to make this a slightly less lame straw, and had a look at the incidence of PLAYR on google trends, and it doesn't really show much. Interest really peaked back in 2016. Explored a few more related search terms/topics, but all were roughly similar (though noticed if you check the Catapult PLAYR SmartCoach System Topic, the interest shifts from Ethiopia and Mongolia as number one, to Poland, Norway, Canada, and Denmark. Maybe someone that knows more can comment on sales focus of CAT? Growing in Europe? 

Disc: Don't own CAT, but have watched for a while and contemplated it.

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#Tom Bogan joins board
Last edited 3 weeks ago

The announcement of a new independent director isn't usually a factor for me, but Catapult's latest appointment seems noteworthy.

Tom Bogan (linkedIn profile here) will join Catapult's board from tomorrow. He's got an impressive CV, acting as the current vice-Chairman of Workday, former CEO of Adaptive Insights and former partner at Greylock. All of these are huge success stories in the US.

Given Catapult's North American focus and opportunity, it's great to be able to tap into that experience and no doubt a valuable network. In fact, he's heading up a new SaaS Scaling Committee specifically created for this purpose.

I don't want to oversell it -- i'm not changing my valuation or anything -- but I do think this is quite encouraging. Someone like that virtually has their pick of board spots, so to pick a relatively tiny Aussie company suggests he sees big potential (Workday does 40x CAT's revenues).

If Catapult can continue to show cost restraint and a rebound from the covid-induced slump, I suspect it will be due for a re-rate by the market.

FY21 will be a rather ordinary year given the weak first half and the lingering covid situation in the US, but i'll be pleased so long as there's some good indications the sales trajectory is returning to a 15-20% range. If not, it'll prompt a rethink.

ASX announcement here

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#HY21 Results
Added 2 months ago

Catapult's half year results for FY21 were hit pretty hard by the covid-induced slowdown in proffessional sports.

Revenue was off 8%, as teams slashed budgets, but also as the business continued to switch away from capital sales.

Net profit took a big hit dropping 39% due the operating leverage of the business and an increase in corporate overheads (it was flat on an "underlying" basis)

Catapult has really failed to deliver the kind of results the faithful (like me) have hoped for -- at least so far.

Inspite of this, there are still a few reasons to remain hopeful.

Covid was a genuine and massive hit to the industry, particularly in their largest segment (USA). Although that impacted the business, churn was reduced over the period (4.5%, a record level), and ACV grew 8%.

In fact, there was 14% subscription growth in the key 'Performance & Health' segment. 78% of revenue is now recurring in nature, and there was a 19% increase in the number of clients using 2 or more solutions. 

Importantly, the business delivered $8.8m in free cash flow, and has over $24m in cash. It remains very well funded.

I think the business showed itself to be rather resilient given the trading environment.

As sports return to normal, it seems likely that Catapult will remain sustainably cash generative, and soon start to post statutory profit. I remain convinced that the business will be bigger and better in 5 years.

Estimating growth is the hard part, but will update my thoughts in my valuation.

But if the business can return to top line growth of 10-15%pa in the next few years, and if it can transition to profitability, then i think it could get a meaningful re-rate by the market.

If it falls short, shares could easily drop lower in the coming years, but my view is that the downside is less than the upside, given the low multiple CAT currently trades at. ie. the market is not pricing in much growth anyway.

disc: held

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#H1 FY21 Results 
Last edited 2 months ago

H1 FY21 Results 

 

HIGHLIGHTS (all growth rates are YoY unless specified)

Now reporting financials are in USD (not in AUD as reported previously)

• Growth of 8.3% in Annualised Contract Value (ACV), the key subscription metric used

   by the Company

• Reduction in ACV Churn to 4.5%, despite the severe COVID-19 challenges

• Customers with 2 or more solutions grew 19%, highlighting the value of Catapult’s

  platform

• Increase in Contribution Margin to 50%, up 8% from 46%, as business efficiency rises

  further

• Once again free cash flow was strongly positive, at $8.8m1

• Average customer lifetime duration increased 1.6% to 6.1 years

• Continued Investment in future growth with solution upgrades, $3.3m in R&D

  investment, and the Science for Sport acquisition


Link to pre-recorder presentation 
https://www.youtube.com/watch?v=NnjQdxqSkYs&feature=youtu.be&ab_channel=Catapult

 

Link to PDF presentation 

https://cdn-api.markitdigital.com/apiman-gateway/ASX/asx-research/1.0/file/2924-02345857-3A562175?access_token=83ff96335c2d45a094df02a206a39ff4  

 

I will post my thoughts tomorrow once I have had some more time to look over numbers. 

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#New partnership with Push
Added 2 months ago

Push's main product, (hardware and accompanying software) is what's called Velocity based training (VBT). 

This is a relatively new, and highly researched device and training method which is meant to provide objective quantification of an athlete’s performance. The data can gauge the athlete’s ability/readiness to train and minimise overtraining/fatigue.

Push is a well known and respected company/product that has close relationships with national sporting bodies (Olympic teams) as well as elite sporting teams.

 

Refer to Strawman's thoughts for great thoughts on CAT

 

Disc: Held

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#New partnerships
Added 2 months ago

Catapult announced two new partnerships today; one with PUSH (tech for gym training sessions) and Pro Quick Draw (an online playbook for American football coaches).

The exact nature of the partnerships wasn't disclosed, although it looks as though at the very least it should offer some new sales channels. It seems likely that Catapult would also earn a commission on any partner product sales.

More importantly, to my mind, it helps strengthen the customer value proposition, which should be useful for retention, sales and the network effect over time. Especially as these partnerships lead to better integration of these products.

This is not a material announcement in regard to near term financials, and my valuation remains unchanged.

Some of the legacy issues with Catapult seem still weigh on investor sentiment, but I feel the new team is making all the right moves.

Relative to other tech stocks, Catapult is trading on a very undemanding valuation at 3.6x sales. (eg NEA is also a business that has variable costs -- not near 100% gross margins like a pure-play software company -- and is also growing at similar rates, has a P/S of ~10x)

It's free cash flow positive, well capitalised and growing its ARR at 17%pa over recent years. It still has a long way to run and I think also some latent pricing power. It's the dominant player in a large and fast growing industry, where network effects play an important role.

disc: held

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#American College NCAA
Last edited 2 months ago

CAT announced the following details regarding NFL productions and bleacher report. Overall another good deal and high profile client. The NFL draft is widely followed and coverage which includes data which Catapult will provide will be a key feature of the film production and presentations.  

 

For 2020-21 United States college sports year, catapult licensing renewed agreements with nfl productions and bleacher report

“The Bleacher Report production team uses Catapult to create original content on a daily basis, while NFL Productions relies on Catapult Licensing for research, rights clearances, and content fulfillment services for a multitude of projects which include original programming on NFL Network and documentary projects produced by NFL Films. Catapult content is often featured in popular NFL programming, such as “A Football Life”, “Path to the Draft”, and coverage of the NFL Draft, with audiences in the several millions for each program.”

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#Renews Agreement 2/2/21
Added 3 months ago

CATAPULT LICENSING RENEWS AGREEMENT WITH NFL PRODUCTIONS AND BLEACHER REPORT, TO SUPPORT BRANDS LIKE SAMSUNG, GUINNESS, NISSAN, AND ADIDAS

Catapult Group International Limited (ASX:CAT, ‘Catapult’ or the ‘Group’) is pleased to update the market on the progress of its Media & Engagement vertical, with Catapult Licensing renewing and signing several high-profile agreements in FY21.

View Attachment

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#Acquisition
Added 3 months ago

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

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#Competitor - STATsports
Added 4 months ago

19 Dec 2020 - Sky News interview with STATsports co-founder, Sean O'Connor

Key highlights from the interview:

  • Appears STATsports is looking to list on the stock market on the back of strong growth in the past few years.
  • B2B market (elite) grew by 50% this year.
  • Consumer market (amateur) grew by 104% this year.
  • Consumer products are available across 90 countries and currently penetrating the US amateur sports market.
  • Manufactures its products in Northern Ireland.

I think this is positive news for Catapult because it reinforces the growth potential in the amateur wearables market. Also, STATsports' growth ambitions and recent strong financial results paints strong optimism in the future of the sports tech and wearables industry.

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#Analyst Views
Added 4 months ago

Opinions on CAT in the link here from Adam Dawes, Julia Lee and Michael Gable.

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#ASX Announcements
Added 5 months ago

Catapult CEO & Chairman Notes

Well as always - the one thing they always do well is address the market with clear goals and clear objectives. (for the short term or past 12 months). 

Both the notes from the CEO & Chairman marry up (always helps when they are pre-written and cross-checked) but they also have some really interesting comments in there. 

The first time the CEO has addressed the Prosumer section. With the only note being that they didn't lose as much money as they did last year - to which isn't necessarily meaningful without telling us any success in this section.  Going from a $6m loss to a $0.7m loss is better for cashflow but what were the revenues here? What is the growth here? (this is the only growth segment they have at the moment). 

The other notes where a reduction in the lifetime of a customer and an increase in churn. I wonder if this is going to be worse over the next 9 months (shorter FY as they are moving to US timelines). 

I still stand by my opinion that they have little growth in the elite space and they are struggling with integration in the elite space. That doesn't change for me. 

All in all - positive cash flow does help, but how much of that is down to the Payroll Protection Program, JobKeeper and the reduction in staff hours (and salaries). Lets put a 15% swing on those (which come to an end shortly) and maybe its mutten dressed as lamb. 

Or maybe there is finally a CEO in charge and not an executive chairman of 3 companies running it. 


Short term growth in stock price expected - all bets heading towards March 2021. 

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#Bull Case
Added 5 months ago

The Catapult Roller Coaster steams on. 

Over the past 5 years,  I have held many positions in CAT. Started from the bottom now I'm here. 

I truely don't believe they have anywhere near the scope of growth in the elite level as represented. I would say less than 5% of 'elite' classified teams globally would not be using some form of GPS. This may be through their littler known northern hemisphere competitors or even their local cheaper alternates (Which is a big opportunity to poach clients with financial pressures potentially driving customers to alternates)

They essentially spent $250m to acquire their main business which is US video analysis (60+% of Rev). They have been integrating these two products (Being Wearable and Video) for over 12 months an I believe they have less than 10 clients using their entire stack. That's insignificantly against the number of teams they suggest they have. 

Their opportunity lies in the consumer (as they brand it the prosumer) space getting into the mass number of athletes globally. 

The biggest concern here is the global fragmentation of the industry and the significantly heavy lifting that needs to be done. They threw away $10m trying this 2 years ago to little return. This was when the business was at its cash splashing best. 

Whilst they have the red bull rag up showing all the bulls where to look, they don't have any more potential there. 

Their potential is in the lower level segments which has proven to be very very difficult for them to effectively and profitably get any return. 

I hold share as this is a 'sexy' business with all their brands - but the TAM for their current product has almost run its course for little to no return. 

Where to now

#holdon

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#Bull Case
Added 5 months ago

9/11/20 business update CASH FLOW INCREASES US$10.1 MILLION, WHILE CLOUD-BASED SAAS SOLUTIONS USAGE IS AT RECORD LEVELS ACROSS ALL REGIONS

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#FY21 Business Update
Added 5 months ago

The market loved this update, up 13% at time of writing. The CEO WIll Lopes has really made an impression and executed on his strategy since joining Catapult, particularly in regards to cost reduction and earnings improvement, pivoting towards long term SaaS business model from capital sales and churn reduction.

Catapult has decided to pay its loan facility in full, leaving it with $24m USD ($33~m AUD) at November 9th.

It certainly seems that becoming free cash flow positive has given Catapult an ammunition stockpile and I am keen to see how they utilise this asset. In the annoucement they discuss how they are keen to convert new opportunities and capital sales to a subscription SaaS model further alligning to Will's strategy.

There is definitley a tone in the announcement that sales this year will be something to watch and they are upfront about Sales being 'challanged' in the current environment.

I believe Will has created a fantastic foundation for this business and their ability to become FCF positive a year ahead of schedule puts them in prime position for the next year or so as we see sport making a comeback. I will be watching new sales closely as this will be key in growing this strong SaaS subscriber base he has built and expand even further into sports leauges around the world.

 

 

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#New solutions
stale
Last edited 6 months ago

While yesterday's announcement may not have a meaningful impact financially in the short term, this is yet another example of Catapult refining and improving their product offering to make it more specific to the sport and/or the current environment we live in. 

IMO, this level of client care will only widen their moat, improve churn numbers & revenue per customer as they strengthen their relationships and look to increase clients who have more than 1 product offering. 

It's early days still but the new CEO and the team he's built around him appear to be pushing all the right buttons.

https://www.asx.com.au/asxpdf/20201008/pdf/44ngn33tx4gvny.pdf 

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#FY20 Results
stale
Added 7 months ago

Here are my rough thoughts after the FY20 Catapult results presentation in August 2020:

  • Really impressed with Will Lopes (new CEO), taken control of the business, strategy – focused on customer obsession and developing a comprehensive platform of integrated solutions for elite sporting teams and athletes. Love the customer focus.
  • Also focused on generating long term positive FCF as the main metric for shareholders.
  • Lopes obviously has extensive experience with these subscription business models (previously he was in charge of scaling Audible, an Amazon subsidiary), as he has introduced a number of new financial SaaS metrics (ACV, Lifetime Duration, ACV churn, Contribution Margin)
  • Hayden was a bit stiff, but not a bad thing for CFO. Obviously excited about the future of the business and these new SaaS metrics.
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#Business Strategy
stale
Added 7 months ago

Catapult’s management have recently refreshed the business strategy, emphasising long term results and the ultimate goal of generating long term free cash flows. At a high level, their strategy is focused on 3 key ingredients:

  • Customer obsession, with solutions focused on the customer;
  • Capital investment with a long-term focus; and
  • Prudent, deeply analytical decision making.

Management are aiming to move away from a product-based strategy towards a customer solutions based strategy. Elite sporting organisations seek technology solutions across a variety of problems, and although Catapult is a leader in some categories (i.e. management, performance and health, and tactics and coaching), there are numerous other services and features sought by these organisations that Catapult can provide (e.g. professional services, media and engagement). It wants to develop the most comprehensive suite of solutions in the market that provide deeper and more meaningful value to athletes and teams. Catapult is focused on its professional customer segment, rather than the prosumer category.

More specifically, management have identified the following focus areas:

  • Platform expansion – drive greater value for customers, measured by ARR growth
  • Subscription focus – move core business model towards SaaS, build sustainable revenues. Service oriented businesses are successful through building customer relationships. Measured by % of revenue that is recurring.
  • Efficient cost structure – must be a sustainable business model. Seek to improve variable and non-variable costs. Design multi-year roadmap, execute on key metrics. This focus creates long term FCF. Measured by opex as % of revenue.
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#Business Overview
stale
Last edited 7 months ago

Catapult is a global sports technology business that is building the platform of solutions for elite teams and athletes. Currently, Catapult’s platform includes wearable tracking solutions, video and analytics. Catapult, headquartered in Melbourne, Australia, works with ~3,000 teams in 137 countries around the world and across 39 different sports. Catapult has approximately 340 employees and a market capitalisation of approximately $320m (August 2020).

Catapult operates via 3 segments:

  • Wearables (e.g. Vector, ClearSky) – wearable hardware devices (i.e. vests) with a GPS, accelerator etc. that provide athletes and their sporting organisations with detailed, real-time data and analytics to monitor and measure their fitness, risk of injury etc.
  • Video Analytics (e.g. Vision, PlayerTek) – digital video coaching and analytics solutions, video platform for coaches to edit, share and communicate highlights.
  • Other / New Products – athlete management platform that collect, store and communicate athlete information.

Catapult’s customers are predominantly elite professional sports teams, including various NBA teams (e.g. Golden State Warriors), NFL teams (e.g. Dallas Cowboys), soccer teams (e.g. Real Madrid) and universities (e.g. University of Notre Dame). Catapult has also signed league-wide deals with certain sporting leagues or bodies such as the AFL, NBL and Cricket Australia. The company also provides solutions to semi-professional athletes under its ‘prosumer’ division.

As athlete health and wellbeing is becoming a priority for elite sporting teams, Catapult helps these teams monitor, track and provide feedback in real time to athletes and coaches.

Catapult’s purpose is to build and improve the performance of athletes and teams.

Catapult’s largest markets are Australia, Europe and North America – with the US becoming the predominant business over the last 18 months.

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#Investment Thesis
stale
Added 7 months ago
  • Catapult provides best-in-class solutions to elite athletes, with a loyal customer base that includes the most elite sporting organisations in the world.
  • Highly scalable, SaaS business with high margins, sticky recurring revenues and multiple growth avenues within a growing sports technology market.
  • Catapult’s new management team has refreshed the overall corporate strategy, focusing on customer obsession and profitable growth, and has already guided Catapult past a number of important milestones including positive free cash flow.
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#Contract Win
stale
Added 7 months ago

Catapult has been appointed the preferred tech supplier for the French National Rugby Leagure (LNR) team.

The extensive tender process began in 2019 and began with a view to optimise performance ahead of the 2023 World Cup.

No financials were provided, and the announcement was not marked as market sensitive, so this is not a material deal in and of itself.

However, it is encouraging to see Catapult win this deal after such a lengthy and detailed tender process, and that it involves the full suite of technology.

Announcement here

[Disc. held]

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#CAT added to StrawmanPortfolio
Added 8 months ago

Hopefully, that screenshot (as described in the forum posts and replies) works - when you click on the "View Attachment" button below.

View Attachment

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#FY20 Results
stale
Last edited 8 months ago

This was a really good result for Catapult. It gives me further encouragement that the business has indeed (finally) turned a corner, and that the new CEO is on the right path.

  • Subscription revenue up 21%
  • EBITDA up 225% (from $4.1m to $13.3m, and ahead of expectations for $11.5-12.5m)
  • Free cash flow positive, $9 million
  • 39% growth in multi-solution customer numbers
  • Cash on hand of $39.8m (as of 14 August)

Capital sales were down 27% as the peak US sales season was impacted by covid, and as the grouop continues to shift customers to a subscription model. As a result, Revenue was only 6% higher. The company expects a good deal of sales that were deferred in Q4 to be recorded in the current first quarter.

Also, applying D&A, the company still reported a statutory loss of $7.7m.

Looking ahead, the company expects to increase R&D and also some cost reductions acheived in response to COVID will be wound back. The business still expects to generate free cash flow in the current year.

(note, they are moving to a March year end and will report future results in USD to reflect their geographic exposure and better align with sales cycles).

There's a bit of detail to explore, read the results presentation here.

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#Contract Win
stale
Added 8 months ago

Catapult has been awarded its largest ever capital deal, providing 16 sports acadamies and teams under Hungray's BKMS Sports with video and wearables services. 

The announcement was not marked as market sensitive, and no financial details were provided, so it's unlikely this deal will be material in and of itself. Though it is encouraging that the company has secured a record contract win in the current environment.

ASX announcement here

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#Management
stale
Added 9 months ago

DOH, my Son wanted to buy some CAT. I said we'll wait for a bit of a drop. I owe him 11% today. :-)

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#ASX Announcements
stale
Added 9 months ago

Catapult has been awarded a video exchange contract by US college football teams.

The announcement says that this deal could open up more commercial opportunities. 

https://www.asx.com.au/asxpdf/20200803/pdf/44l40mnkm4sswn.pdf

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#Industry/competitors
stale
Last edited 9 months ago

I'm new to Catapult and not familiar with their competitors/the industry. Here's a quick lay of the land with some initial findings.

High level summary:

Catapult does seem to have the most clients (2970+) and federations (150+) and is the most established. Statsports certainly looks to be the upcomer challenger brand playing in the same space. There's a host of smaller players dominating certain sports, competitions or niches (e.g. KINEXON, GPEXE) with traditional wearable companies like Polar also joining the team-tech party in recent times.

The main question is who is gaining market share in recent times and does Catapult have enough of a business moat especially against Statsports?


In no particular order, here's a couple of the competitors:

Statsports

  • "STATSports is the worlds leading provider of GPS trackers for sport. We provide a performance analysis system for elite sports teams and individual athletes."
  • In terms of EPL (soccer) teams: Manchester United, Spurs, Liverpool. Also has the Socceroos.
  • https://statsports.com/

Zebra

KINEXON

  • "KINEXON provides unrivaled player tracking and delivers athlete monitoring data in real-time."
  • biggest provider of wearables in the NBA
    https://kinexon.com/

GPEXE

Polar

Orreco

  • "We use biomarkers and data science to identify an athlete's individual thresholds and provide personalized strategies to keep athletes in their peak performance zones."
  • https://www.orreco.com/
     

Honourable mention for the pro-sumer market:

Whoop

  • "brings you closer to unlocking your human potential."
  • for high performers and serious exercise fa???ns
  • https://www.whoop.com/
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#Change of FY
stale
Added 9 months ago

A small but noteworthy thing: Catapult is changing its financial year end to 31 March and results will be presented in USD.

The main reason is because the current June 30 year end conflicts with the peak Norther Hemisphere selling season, which runs May to August and accounts for 85% of sales. Also, 70% of earnings are in US dollars.

The FY21 will therefore run for only 9 months.

Makes sense to me.

ASX announcement here

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#FY20 Results Preview
stale
Last edited 9 months ago

Catapult is expecting the following for  FY2020:

Total revenue between $100-$101 million, up 5.3% from $95.4m in FY19.

EBITDA of $11.5-12.5m, up 192% from $4.1m last year.

$9m in free cash for FY2020; a big turnaround from the $24m loss last year and achieving a positive result a year earlier than expected.

Cash balance is $27.5m.

CEO Will Lopez said the professional sports landscape had improved since the last update on March 27, and that the business had continued to win new deals and retain customers during the lockdowns. However, this disruption has delayed things and many of the sales that would have been made in the last quarter are now expected to be delivered in the FY21 year.

With cost reductions already in focus, it seems covid allowed the business to cut costs faster and deeper than originally planned. There was always a nicely profitable business inside of catapult, so it's great to see that being unearthed (seemingly) without much of an impact on sales growth.

Speaking of which, 5%-odd top line growth would normally be a very disappointing result, but in the context of a raging pandemic -- one that had a direct and significant financial impact on its customers -- it could have been a lot worse.

As you can see in the chart below, sales are always much stronger on the second half (with sales typically dropping a bit from one year's second half, to the following year's first half). In this instance H2, sales were the same as H1 and down 5% from H2 2019. Normalising FY20 second half result using the H2 19's growth, sales would have come in 12% higher at $112m.

Given things will be tough for the foreseeable future, I'd be happy enough if they could score 10% sales growth for FY21, before returning to 15-20% odd growth (on average) over the coming 5-6 years.

Based on last close of $1.27, shares are trading at an EV/EBITDA ratio of 18. Assuming they can recover to near pre-covid sales growth in the coming years, and maintain cost discipline, that seems very undemanding.

Full results will be out late August.

Read ful announcement here

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#Easing cost cuts
stale
Added 9 months ago

Catapult announced that it is unwinding its costs savings measures (reduced salaries and furlough leave) as the impact of the coronavirus has been less than expected.

This announcement was not marked as market sensitive, and no specifics were provided, but I take it as a positive that the company feels such mitigation is no longer necessary (especially with so much business in North America).

I'm not reading into this too much, but felt it was noteworthy.

See here

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#Bull Case
stale
Added 11 months ago

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.

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#Bear Case
stale
Added 11 months ago

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.

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#COVID-19 Impact
stale
Added 11 months ago

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)

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#COVID-19 Impact
stale
Added 11 months ago

With sports beginning to start back up it is going to be very interesting to see whether the COVID-19 shutdown of sports worldwide is just a bump on the road or there are more significant long term effects on the business.

BEAR CASE: while sports are beginning to resume across the world (to empty stadiums) there has been huge financial losses to all sporting codes and clubs wolrdwide.  These massive losses in revenue could well lead to significant cuts (short & long term) and it may take a lot longer than expected to get back to where we were pre COVID.  Locally, you can see the effects on our football codes with huge cuts in spending in the short term and potential winding back and cost cutting for the longer term.  While many customers are on long term subscription contracts the bear in my thinks there are big risks in the short/medium term growth prospects of the company when sporting clubs all over the world are looking at how they can cut back spending, not looking to increase it by purchasing one of CAT's products.

BULL CASE: just a bump in the road.  As mentioned, most of CAT's clients are on long term subscription contracts and they have a very sticky product and improving churn.  Given the hugely valuable information CAT's products provide it will be hard for clients to cut this product as they have become reliant on the information it provides in supporting their players.  Growth wise, if sport resumes as expected and crowds are allowed back ASAP then revenue losses will be minimised leading to greater $$$ to spend going forward.

I have always been a big fan of their tech and the opportunity CAT has in the growing sports science/high performance landscape.  From their last update, it was postive to see their cash reserves are still over 30m (factoring in loan they've drawn down on) which is what they had at their HY presentation, meaning they aren't leaking cash through this challenging period (so far).  Expecting little to no growth in H2, but FY21 is going to be a close watch to see if we can pick up any indications as to any long term effects of spending throughout the sporting landscape. 

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#COVID-19 Impact
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Last edited one year ago

Catapult has provided an update relating to the impact Coronavirus is having on its business.

Catapult reiterated its strong cash position, which combined with a recent drawdown of $5m in debt from its existing facilities, gives it ~$30m in cash.

It is working to manage costs and manage working capital (although, no mangement or directors have taken a pay cut -- unlike other pre-profit companies. Seems like that would be the classy thing to do).

The company is "comfortable" its ability to reach cash flow positive has not been materially impacted, and has reiterated guidance for that milestone to be reached by FY21.

Customers continue to use and purchase their products, but purchasing decisions are likely to be deferred, and that Q4 new sales growth is likely to be negatively impacted.

75% of revenues are are based on long-term subscription payments.

The business will benefit from a weakening Aussie dollar. (looking seperately at the FY19 annual report, a 10% fall in the AUD would have boosted profit by ~$3.5m)

CEO Will Lopes said that the group is well placed to navigate the crisis and the strong cash position will strengthen their competive position long-term.

Full announcement here  

 

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#Oversold?
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Added one year ago

Catapult shares are down 65% since the start of the bear market -- around double that of the wider market. 

I think the business will struggle to make ANY sales for the rest of the year, and will be a slow pick up after that. The various leagues they service are all winding back, some entirely. In many cases, player pay is under review.

Catapult's customers are more sensitive to the impacts of this virus than I had first imagined. Initially, my expectation was that elite sports would continue, just without crowds and for broadcast only. But with entire seasons being suspended, this was a flawed assumption. 

The business was EBITDA and FCF positive in the latest half, and was on track for its first full year of positive cash flow, but they could linger in the red a while longer with this big halt to new sales.

That being said, the company has $25m in cash and no debt. That should keep them afloat until some form of normalcy returns for their customers. They also had $68m in recurring revenue, and though churn will almost certainly rise, it gives some comfort that there will be a base of operational cash flows coming in.

After Catapults first half results, i was assuming it could get $112m in revenues this year. That now looks unlikely.

If we assume that professional sport will be up and running again in another year or so, but allow for a big dip in sales and a slower growth rate from a lower base, we could say (for the sake of argument) that Catapult only reaches $112m in revenue and profitability in 3 years time. If we give the company a P/S of only 2, we get a target price of $1.14, which is 75c (the current market price) if we discount back at an aggressive 15% per annum.

In other words, assuming catapult can endure a large but ultimately temporary drop in new sales, you can sketch out a case for value using very low-ball assumptions. 

But maybe those assumptions, as unambitious as they may seem, are not reasonable?

I'll continue to watch closely

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#Bear Case
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Added one year ago

With news that a lot of major sporting events are being cancelled, the flow-on effects to Catapult, especially regarding media coverage within matches could be impactful.

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#HY20 Results
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Added one year ago

A good result for the 6 months ending Dec 31, 2019.

Revenue grew 18% to 50.7m, while the net loss essentially halved to -$4.8m.

Catapult recorded a positive EBITDA of $5.7m compared to a loss of -$1.4m in the prior first half. (They did get a bit of a boost from the adoption of AASB16. On a like for like basis, EBITDA came in at $4.7m)

Importantly, Catapult saw positive free cash flow of $13.6m, which has boosted cash to $24.7m. There's some seasonality here, but the company reaffirmed its expectations to sustainably generate positive FCF by FY21, and it seems unlikely it will need to raise cash again. 

Cross-sell initiatives seem to be doing well, with the number of customers with more than one Catapult product rising 66%. Overall customer numbers grew 19%.

The major North American segment saw growth of 21% in revenue -- it now represents 70% of the total. EMEA grew 15.5% and APAC grew 10%.

ARR grew 20% to $68.8m. 

Perhaps best of all, operating costs declined by 4%. (poor cost discipline in prior periods under previous mamangement was always a big concern).

Churn decreased from 5.2% in FY19 to 4.8% at the half.

Also encouraging to see the previously striggling Prosumer segment improve its loss from -$3.6m to just -$0.4m. Revenue growth was 9%, with reduced costs and marketing spend driving the bottom line improvement. 

Results presentation can be viewed here

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#Management
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Added one year ago

Significant selling by founder and also chairman.

Im out.

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#Broker Coverage
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Last edited one year ago

Morgans has raised its taregt price for Catapult from $1.72 to $2.19.

It has cited the renewal of the Australian Rugby Union contract, and other recent contract wins and increased conviction that Catapult will be self-sustaining by the next financial year.

It is forecasting an ~18% lift in sales for FY20 to $112.5m and an EBITDA of $15m. It expects Catapult to record a net profit in FY21 of $4.17m

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