This morning professional sports analytics business Catapult Group International Ltd (ASX: CAT) reported a loss of $13.6 million on revenues of $60.8 million for the full year ending June 30, 2017. The loss was more than double the prior year's as costs rise and the group invests heavily in securing its market-leading position.
Its management also flagged that "underlying EBITDA" (operating income) came in at $2.9 million after a year boosted by the significant acquisition of the XOS sports monitoring business.
Catapult has some attractive qualities as a business including its market-leading position, blue-chip client list, high retention rates, recurring revenues, and strong growth in global markets. It also appears to be building a narrow moat, which is unusual for such a small company in a global market like professional sports.
Despite all this though the positive underlying EBITDA figure of $2.9 million is only arrived at when excluding share-based payment costs of $3.3 million and other costs including those related to a recent capital raising. After including these "one off" costs it made a real world operating income loss of $3.7 million for the year.
So while the group ticks the boxes on several fronts the financial results are disappointing in my opinion and given its relatively large valuation it has a lot to deliver ahead of it.
It's still likely to grow nicely in the professional sports sector, although whether its bid to sell products to amateur athletes (in FY18 and beyond) is successful remains up for debate given the competition apps like Fitbit provide in the battle to sell to amateur fitness enthusiasts.
Over the year it posted total operating cash losses of $6.3 million and has cash on hand of $16.7 million after a recent capital raising.
Outlook
It declined to provide a forecast as to FY 2018, although it was questioned on today's conference call as to the likelihood of another capital raising. Management didn't really comment, other than to confirm that it has sufficient cash to see it through the year ahead.
Which way the share price heads over the short term is hard to know and over the long term it will be determined by the company's ability to manage costs and deliver profits to investors. I sold out of my position around $1.95 in the stock for a flat return around a month ago, although will keep it on the watch list over the year ahead and expect some volatility.
