Catapult Group International Ltd (ASX:CAT) shares drop lower on quarterly update

It has been a disappointing day of trade so far for the Catapult Group International Ltd (ASX: CAT) share price.

In late morning trade the sports analytics and wearables company’s shares are down almost 3% to $1.20 following the release of its latest quarterly update.

What was in the update?

According to today’s release, Catapult’s preliminary unaudited revenue for FY 2018 is $75.8 million, representing growth of 26% on a reported basis and 19% on a pro forma basis. Its unaudited group earnings before interest, tax, depreciation, and amortisation (EBITDA) came in at $0.6 million.

Both these figures are in line with the guidance management provided for the full-year and were driven largely by the growth of its Elite Wearables business.

Revenue in the segment grew 29% on the prior corresponding period to $34 million. In addition to this, the segment finished the year with annualised recurring revenues (ARR) of $24.4 million, also up 29% year-on-year.

Subscriptions now account for 60% of Elite Wearables revenue, up slightly from 58% in FY 2017.

Its biggest segment, Elite Video, didn’t have quite as strong a year. It achieved revenue of $39.4 million during the period, up 9% on a pro forma constant currency basis. Segment ARR grew just 5% to $28.4 million.

Its Prosumer business has had a strong start but has yet to generate material revenues. It delivered revenue of $3.4 million in FY 2018, up from $1 million a year earlier.

This sales growth led to a net operating cash flow of $1.5 million in the fourth quarter, an improvement of $7.3 million on the prior corresponding period. As a result, FY 2018 net operating cash flow came in at $6.4 million, marking the first full year of positive operating cash flow for Catapult.

However, due to ~$5 million cash outflow from investing activities, the company finished the period with a cash balance of $31.7 million, down $3.2 million from the end of the last quarter.

Should you invest?

With Catapult’s shares trading within sight of their 52-week low, they certainly are a tempting option. Especially with its operating cash flows now positive and its sizeable cash balance.

However, I’m still not ready to invest just yet. I intend to hold out for a few more quarters of strong revenue growth and improving operating cash flows before making a move.

Until then, I would prefer to invest in fast-growing and profitable tech shares such as Citadel Group Ltd (ASX: CGL) and Altium Limited (ASX: ALU).

Alternatively, these mid cap growth stars could be even better investment options if you don't already own them.

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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 Altium and Citadel Group 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 Scott Phillips.

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