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Catapult Group International Ltd shares edge lower on quarterly update

The Catapult Group International Ltd (ASX: CAT) share price has edged lower on Tuesday following the release of its latest quarterly update.

Here are key takeaways from the second-quarter of FY 2018:

  • Group cash receipts from customers increased 29% on Q2 FY 2017 to $17.6 million.
  • Positive second-quarter FY18 net operating cash flow of $0.9 million.
  • Cash and cash equivalents balance ended the quarter at $18.2 million, down $1.9 million on the closing balance of the first-quarter.
  • Cash outflows expected to be approximately $19.1 million during the third-quarter.

All in all, I felt Catapult delivered a reasonably solid top line result during the quarter.

However, once again the company’s cash flows have failed to show significant progress. In fact, although its net operating cash flow was positive at $0.9 million, this was entirely down to a $1.9 million tax credit received for research and development in FY 2016.

Without out this, operating cash flow would have been down $1 million for the quarter and its cash balance reduced by $3.8 million to $16.4 million.

But one bit of good news is that cash outflows are forecast to be lower in the next quarter at $19.1 million, due largely to a sharp reduction in staff costs. Staff costs are expected to be $9.3 million, compared to $10.7 million during the second-quarter.

While this could be a one-off, all being well it could be the start of a more efficient operation.

Should you invest?

I’m a big fan of Catapult’s products and believe it has a large market opportunity that could make it a great investment. However, I’m still not a buyer of its shares just yet.

Until the company has proven that it can run a highly profitable business, I intend to sit on the sidelines and focus on fast-growing and profitable tech stars such as Big Un Ltd (ASX: BIG) and Appen Ltd (ASX: APX).

Alternatively, these hot tech shares could be even better picks if you ask me.

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Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Catapult Group International Ltd. The Motley Fool Australia owns shares of Appen Ltd. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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