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

I’m setting out my valuation of $CAT here, which I’ve been working on since the FY results were announced.

I’m not going to go back over the results or over my investment thesis, but definitely read @Strawman s “Bull Case” straw of three weeks ago (for the thesis) and the FY25 Results Forum Topic initiated by @BendigoInvesto, and the forum post by @Valueinvestor0909 (his Arichlife article) for some great analysis of the results.

I also recommend watching last week's video discussion between Claude Walker and @Strawman. Some really great insights here, and I found myself nodding furiously to most of it while cooking dinner last night.

In this valuation, I explore some of the key value drivers and sensitivities. My conclusion is that, despite $CAT’s tremendous SP progression (up around 60% YTD 2025), there remains significant upside potential that is not yet recognised by the market.

My overall view, is that in this particular race, $CAT has a long way to run and that it can comfortably keep delivering 15-20% annual returns from here for the foreseeable future. I would see any significant pullback from today’s price as a buying opportunity.

Valuation

My first detailed view on valuation is A$5.50 (A$4.50 - A$6.50). However, I must stress that this does not recognise the significant upside potential that may exist within the business today, and I point to some of this later in this straw.

The chart below captures my analysis, and I will explain what each of the elements means in the remainder of this straw. I'm sorry it is so complicated, but I will step through it.

The easy bits to see are Friday’s closing price (A$5.85) and the range of analyst views (www.marketscreener.com; n=6) of $5-$6.

An important motivation for me to do this analysis is to properly understand the upside potential in this business. It is clear the market has reacted positively, and the business is gaining increasing analyst coverage. I felt I wanted to have a point of view on risk/reward around the SP, partly to temper any tendency to take some profits if the SP continues to appreciate.

Another prompt is @Strawman's valuation of A$3.51, which is a simple calculation which asks: how long does it take $CAT to get to Will’s US1bn revenue at his target margin structure, and what would such a business be worth today, using an EBITDA multiple? I replicated a similar analysis (getting a similar number). My main concern with that valuation, is that at the terminal point, the business is still growing FCF at 19% annually, so an EV/EBITDA multiple of 12 seems low. Using multiples of 15 and 20 yields SP’s of $4.35 and $5.22, respectively, using similar assumptions to @Strawman .

Conclusion for My Investment Decisions

What emerges from my analysis detailed below is a view that:

• Should the SP fall back towards my lower range of A$4.50, I would be willing to add more to my existing 8% RL ASX holding.  
• I won’t countenance selling in the short term at anything less that $7.00.

To unpack the analysis leading to the above chart, I’ve structured this straw as follows:

1. Approach of Valuation

2. Revenue Growth Scenarios

3. Margin Evolution Scenarios

4. Impact of Share Based Compensation

5. Discussion of Valuation Results (Referring to the Graph)

6. Further Upsides Not Quantified

7. Risks and When I’d Sell

8. Other Assumptions Used

1. Approach to Valuation

CEO Will Lopes have given us a nice framework for valuation.

Basically, what he calls “Management EBITDA” is simply Free Cashflow before Interest and Tax.

This has then enabled me to run a simple DCF where I have the starting point of FY25 and simply then have to make four assumptions:

1.     By what year are the target margin ratios achieved?

2.     How do margins evolve from today until the target ratios are achieved?

3.     What is the revenue growth each year?

4.     What is the rate of ongoing dilution due to share based compensation?

Of course, there are all the other assumptions that needed for a DCF, which I list at the end of this straw.

In line with @Strawman’s valuation, I run the DCF out to 2038, as this is notionally the period over which $CAT can grow strongly to achieve the ballpark $1bn revenue.

2. Revenue Growth

Total revenue growth in the last two years has been 18.5% and 16.5%, however the key value driver has been subscription growth, which has been higher, and there has also been the current headwind of a strengthening US dollar. As @Strawman points out, growing at 20% CAGR means it will take c. 13 years to hit $1bn revenue.

As @jcmleng picked out of the recent Livewire interview, Will has said he aims to get current ACV of $26-$27k per team up to $100-$150k, driven largely off product enhancements currently in development, and continuing to get more teams onto multiple products. In this interview he made clear that this won’t just be the preserve of the top elite pro teams, but that the capabilities in the platform will enable less well-off pro teams to make more productive use of their staff. So $CAT is to the coaching and fitness staff of a pro sports team what Cargowise at $WTC is to workers in a logistics firm, or $XRO to an accountancy practice. The software does more of the repetitive tasks, freeing staff up for higher value staff or allowing an operation to run a leaner crew. This cost saving agenda for clubs is in addition to helping them manage the players better, which is likely a much bigger prize.

This is going to be really important to drive the adoption of $CAT in pro sports teams. For the richest teams with budgets of $100m to $500m p.a., the spend on $CAT is peanuts. Once it is embedded in their workflows, the pricing power will be strong. However, in smaller clubs, with budgets of a few millions, investing in $CAT will be carefully justified. So running with a support staff of 6-8 instead of 8-10 is what will be needed to justify Will's vision of a broad capture of $100-$150k ACV deep into the subscriber base. It seems plausible.

So what's the revenue runway?

There are 3x-4x in the number of teams ahead of it, 4x-5x of multi-vertical conversion ahead, and with further enhancements drived by ongoing R&D spend at a solid 15% of revenue, ongoing, it does not take a leap of faith to believe that $CAT can grow strongly for many years to come. 10x to 15x in revenue seems very plausible.

In fact, in the early years, given the money going into pro sports, the strong growth of video in T&C, and the availability of Vector 8 which offers many improvements, there is every chance we could see revenue growth start to accelerate from the 18%-20% of where we currently are.

So this then leads me to my revenue growth scenarios for the next 14 years:

Within the series of curves on the graphs shown above, in Red Circles 1 and 2, I simply assume constant, annual revenue growth rates of 15%, 17% and 19% from 2026 out to 2038.

But growth won’t be linear, so in the Red Circle 3 lines, I’ve assumed revenue growth starts at today’s c. 19% p.a. and then exponentially decays each year to reach the values on the horizontal axis, i.e., 19% (no change), 17% and 15%. So the Red Circle 3 lines represent the upside to valuation that revenue growth stays "stronger for longer".

3. Margin Evolution

I’m comfortable with Will’s proposed target margin structure shown above, simply because of the track record over the last few years.

But what made me sit up and take notice in the FY results call, was Will’s statement that he believes $CAT can get to this structure by the time revenue hits $200m.

What!? That’s not FY39 but FY29. Wow. Of course we don’t know when that margin structure will be achieved, but it is a very important valuation parameter.

So, in the curves shown by Red Circle 1, I’ve assumed that the target margin structure is achieve in FY38, and that between FY25 and FY38 the gap between the current margin structure and the target closes linearly.

But, Will believes they’ll get there much earlier. And this is consistent with the current trajectory. Therefore the curves shown by Red Circles 2 and 3, assume the gap to the target margin structure is closed progressively between FY25 and FY29. Thereafter I’ve assumed the target margin structure is maintained. (I’ll come back to this later.)

So, now we can see across the three groups of lines how revenue growth and margin evolution drive valuation.

4. Share Based Compensation

I’ve done a deep dive to understand the impact of share-based compensation. It is tedious, but important. In the last three years, SOI have increased by 6.9%(FY23), 6.2%(FY24) and 2.7%(FY25). However, there are some important factors to be considered.

First, in FY23 and FY25 parts of the increase in shares was due to the earnout of the SBG Sports Software acquisition. And in FY24, when the SP was in the toilet, the Board seemed to double-dip, offering a second round of compensation, presumably because retention was at risk as staff shares were worth not very much and options were being cancelled.

So, with this understanding in mind, I’ve run scenarios for ongoing share-based compensation levels of 2.5%, 3.5%, and 4.5%. And that explains why for each set of curves, there are three closely stacked curves. The impact of dilution across this range has a SP impact of around A$0.10 at the lowest valuations up to A$0.15 at the highest.

5. Discussion of the Valuation

The above sections explain all the variables plotted in the chart above.

In choosing my valuation range of A$4.50 - A$6.50 I have been conservative. I believe that the target margin structure will be achieved over the next 4-5 years. And I also believe that revenue growth will be more in the range of 17%-21% p.a. over the next 5 years. Taken together, these will result in upwards revisions to my valuations over time, and the analysis presented gives an indication of the scale of sensitivity.

6. Further Upsides

I am going to explore some further upsides, not included in the model.

6.1 Revenue

Will has established a disciplined resource allocation model that appears to be driving c. 20% annual subscription growth, without pulling the pricing lever. I think that’s the right strategy – driving innovation to maintain the product’s industry leading position, and encouraging more and more of the target market to adopt, all-the-while achieving strong growth in free cash flow.

There are three potential future revenue opportunities:

·      Providing more services to broadcasters to enhance viewer experience

·      Leveraging the vast database of player data and enhancing predictive analytics

·      Connecting third party devices and services into the platform.

And, as I explain at the end, my DCF Continuing Value growth rate in 2039 is 3.0%. Obviously, if $CAT is still growing revenue at 15%, 17% or 19% in 2029, then this is a conservative assumption.

I’ve not modelled any of these revenue upsides.

6.2 Margin

In my modelling I’ve assumed Will can hit the target margin structure and that when he does, the business stays there into the future. So, this is worth a deeper dive.

First Gross Margin. The target %GM of 80% has already been exceeded in the last two years. And with the transition to subscription now complete, and the focus firmly on software rather than hardware development, it seems entirely plausible that as the business scales, higher %GMs will be achieved. It doesn’t seem a leap of faith to consider that a $1bn revenue $CAT could have a %GM of 85%. One to keep an eye on over time.

“Delivery” and “S&M” will probably scale proportionately as the business scales. A target spend of 15% for S&M is comparable with Microsoft (c.12%) and Oracle (16%). Firms in more competitive markets can spend a lot more - Salesforce (33%), Intuit (27%) Adobe (30%). As $CAT scales to $1bn revenue, its reputation in the sector will be well and truly cemented, and so a relatively low 15% S&M spend sounds reasonable.

Equally, spending 15% on R&D is both wise and appropriate. For $CAT to maintain its industry-leading position, it will need to innovate continuously. I see only downside risk to scaling back on innovation.

A final upside is G&A. Here 10% has been assumed. As the business scales, provided it retains a clear focus on pro sports, its should be possible to retain a focused overhead structure. Upsides to 6% to 8% are conceivable.

In conclusion, considering both Gross Margin and G&A opportunities, it is conceivable that $CAT could expand its “Management EBITDA Margin” from 30% to 35%.

Again, I’ve not included this upside in today’s valuation. But it is one to bear in mind over the coming years.

7. Risks and When I’d Sell

Competition & Innovation

The global pro sports industry is vast and is attracting a lot of capital and technological innovation. While $CAT has a clear lead over its much small and less developed rival Statsports, it is worth keeping an eye on the competitive playing field. Of course, the industry is so large that there is room for multiple players. As importantly, is the need for $CAT to innovate, and bring more and more capabilities and features of value to its customers. Maintaining a consistent watch on both its innovation progress and the competition is key.

Management

The more I get to hear Will the more I am impressed with his leadership. Few businesses put out such an explicit, value-based, economic framework against which progress can be tracked. As far as I am concerned, $CAT has no need to offer guidance. They simply have to explain their results in the context of progress against this framework – and this includes periods when progress won’t be linear. I think it is easy to under-estimate the value that Will has personally brought to this business over the last few years. I don’t yet see this as a business that any professional manager can run, and I’d be very concerned if Will were to leave. It would be good to understand more about the bench below him.

Customers

It is important to see $CAT firing on all dimensions of customer value: low churn, increase multi-verticals %, new customer adds, rising ARPU. While growth won’t always be linear, I’d become concerned if during two consecutive years revenue growth fell back to 15%.

8. Other Assumptions Used

All values are $US unless states as $A.

Discount rate:                10%

Tax Rate:                         30%

Capital Structure:         No LT Debt; net finance cost of 2% of (Variable Costs + Fixed Costs)

AUD:USD:                       0.65

CV Growth rate:            3.0%

Disc: Held in RL and SM

Board Ownership

Share Holding % Of Issue Net Worth $3.38

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

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

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

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

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

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

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

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

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

Mangement Bio

Adir Shiffman - Executive Chairman 

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

Will lopes -Chief executive officer and managing director

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

Shaun Holthouse -Non-executive director and co-founder

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

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

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

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

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

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

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

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

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

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

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

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

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

Have noticed an increse in SM selling of CAT in the past 1-2 weeks coming through my alerts. While buy and sell movements happen all the time in SM, the number on CAT just seemed more frequent than "normal" ..

Would really appreciate if you could share your thought process for selling on SM, and if that sale was mirrored IRL as well. Keen to test if there is something I am missing from my own CAT thesis as I am quite the opposite - bullish and looking to top up IRL on further weakness!

Discl: Held on SM and IRL

15% selldown (remains 5 million shares) worth a couple of mil…

Adir Shiffman (exec chair)

just for noting

Change of Director's Interest Noti...

Change of Director's Interest Notice

No. of securities held prior to change

Direct

Nil

Indirect

6,042,100 fully paid ordinary shares comprising:

5.609 tuly paid ordinary shares

BBHF Pty Ltd <A Shiffman Family A/C>

416,100 fully paid ordinary shares

A & R Shiffman Superannuation Pty Ltd as trustee of A & R Shiffman Super Fund 17,000 fully paid ordinary shares

Class

Fully paid ordinary shares

Number acquired

Nil

Number disposed

1,000,000 Fully paid ordinary shares

Value/Consideration

Note: If consideration is non-cash, provide details and estimated valuation

A$2,120,000.00

No. of securities held after change

Direct

Nil

Indirect

5,042,100 fully paid ordinary shares comprising:

BBHF Pty Ltd

4,609,000 fully paid ordinary shares

BBHF Pty Ltd <A Shiffman Family A/C>

416,100 fully paid ordinary shares

A & R Shiffman Superannuation Pty Ltd as trustee of A & R Shiffman Super Fund

17,000 fully paid ordinary shares

Nature of change

in buy-back

21 August 2024 - On-market sale of

1,000,000 fully paid ordinary shares

Part 2 - Change of director's interests in contracts

No dis chose as is a company, interests which come within paragraph i) of the definition of *notifable interest of a director should Detail of contract

Not applicable.

Nature of interest

Not applicable.

+ See chapter 19 for defined terms.

Appendix 3Y Page 2

01/01/2011

Chart Update Mon 1st July 2024

Well Cat is finally starting its pull back for the 4th wave down. Todays candle is very aggresive to the downside. You can see my target box with the bottom being in the range 1.56 - 1.67. It may not go as low as the 1.56 (or 38.2% of the last wave 3 as a rule) as it's still a bullish stock. Just have to see how it plays out.

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

Steve Johnson from Forager covers Catapult in this interview - https://ausbiz.com.au/media/some-of-those-small-caps-are-worth-a-large-interest?videoId=36142&utm_medium=email&_hsmi=310030752&utm_content=310030752&utm_source=hs_email

Drop for w4 before starting wave 5 up.

Is w3 up finished, hard to tell right now. It may push back up to the $2 mark however im now focused on wave 4 down to add again to my remaining position. My next target is the 1.55 - 1.67 target box. I will state though that wave 4 is usually a drawn out wave before it starts wave up. Wave 4 can be so long it can produce fake break outs to the up side then to fall away again. I sold out 3/4 of my position at the recent top and now have the last 1/4 there to add to again at the bottom of wave 4 providing me with a buffer.

I know a lot here leave the bulk of the stock and only sell out small portions. For me however I cant do that as Im getting in on this stock towards the top of a cycle, so I build then take & repeat. If I had got in back in say May 2023 ish for around the 0.65 - 0.70, then I would be playing the long game like yourselves. On the next major pull back which will be somewhere after wave 5, I will enter for more of a long play then.

I got out as last Friday's bar was above/outside the Bollinger Bands, meaning it was at an extreme of more than 2 standard deviations from the norm and also because it hit my Fib target (actually broke above it) and was showing signs late friday afternoon before close that the orders were staking up to get out. I had been watching the order book (buy and sales as well as the size of the orders).

Ill keep an eye on the chart and update as it plays out.

I'm looking forward to reading other SM reports on $CAT today, as I am focused on other things today and won't make the call, but I've just noticed their headlines:

• Annualized Contract Value (ACV), Catapult’s leading indicator of future revenue, grew 20% on a constant currency (CC) basis year on year (YoY)
• The Company hit a milestone revenue mark of US$100.0M (A$152M), up 20% (CC) YoY
• Profit Margin improved +125% YoY resulting in US$4.6M (A$7M) of Free Cash Flow

My quick calculation of FCF is $2.767m (OpCF $31.703 + InvCF -$27.055 + Leases Repaid -$1.972m), however, I've not checked the change in working capital on this.

And of course, this overlooks the hefty non-cash share based compensation element of $9.7m. Which I think means we are being diluted about 4% each year - correct me if I'm wrong.

All that said, the 6-month view below indicates that $CAT has made the transition to a sustainable business. If they can keep on this track. (Note: H2 receipts is seasonally weaker, but look at the cost control. Can they sustain this?)

I recently dipped my toe back in the water with $CAT in RL and SM. I'm still not convinced, so will have to have a harder look at this when I get the time. The slope of my FCF line is promising, however.

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.

Is this the beginning of “the” turnaround?

On first glance this was significantly better than I think most expected.

From the ASX announcement.

H2 EBITDA OF 2.2m a 15.4m improvement from H1.

H2 gross margins up to 81% from 71%.

Cost to operate the business dropped 11.9m in H2 from H1.

Operating cash flow + 40% YoY to 3.7m.

SaaS revenue +21.8% YoY (CC) contributing to a total revenue of 84.4m.

Record H2 sales: FY23 ACV +20.2% to 76.8m (CC).

ACV churn a record low rates of 3.8%

Performance and Health vertical ACV grew 28% YoY (CC).

*** 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].

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.

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?