After hitting an all-time high of $4.29 in 2016, the Catapult Group International Ltd (ASX: CAT) share price has been in a steady decline. Recently there has been renewed interest in the sports analytics business, however. Following a rocky start to the year, the Catapult share price has doubled from its 2019 low of 60.5 cents. Improved earnings and a pipeline of products and deals could make the Catapult share price a long term buy.
What does Catapult do?
Catapult are world leaders in sports analytics and solutions, providing sports teams and athletes with technology that tracks and measures performance and recovery. In the modern age where data technology is of premium value, Catapult provides elite performers and teams with metrics and information they can use to tailor strategy, training and recovery regimes.
Catapult operates three divisions; elite video, wearables, and prosumer. Elite video tools allow teams and coaching staff to monitor and improve game strategy and training regimes. Wearables provide data for athlete performance which can be used to measure strength and conditioning. Prosumer is the division of Catapult which combines video and wearables allowing athletes to track key performance metrics and benchmark themselves against peers.
Currently, Catapult has more than 2500 elite clients, which include iconic brands of global sports such as soccer giants Chelsea Football Club, Real Madrid CF, Milwaukee Bucks in the NBA and numerous college football teams in the USA.
The Catapult business model involves selling access to video, wearables and prosumer divisions on a capital and subscription basis. Earlier this year Catapult proved that its financial performance was improving when it reported half-year earnings.
Catapult reported that the core elite business delivered high growth with annual recurring revenue (ARR) improving 25% to $57.4 million. Revenue for the half year was $43.0 million, a 32% increase from the previous year and customer churn was 3.5% for the period, down from 8.4% indicating renewed loyalty. EBITDA reported as a loss of $1.4 million, a 73% improvement from a $3.8 million loss they year prior and free cash flow was a negative $1.6 million.
New deals and products
Catapult plans to launch its next-generation wearable product ‘Vector’ in 2019. The new product aims to deliver new levels of accuracy and usability with additional tracking functionality and an embedded heart rate monitor. In addition, Catapult has ventured into the sub-elite market with the launch of PlayerTek+, a device that delivers similar metric measurement to its elite products, but at a lower price point.
In April Catapult announced an aggregated contract with the NRL for three seasons, establishing itself as a supplier of technology to all NRL clubs, NRLW teams, national representative teams and match officials. This follows renewed aggregate partnerships with the AFL, AFLW and NBL.
In my opinion, Catapult is a fascinating company servicing a relatively niche market with huge growth potential. Instead of picking the bottom I would like to see Catapult’s core business and recurring subscription revenue consistently grow. For this reason, I remain cautious and will be adding Catapult to my watchlist and waiting for the share price to consolidate before buying.
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Motley Fool contributor Nikhil Gangaram has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Catapult Group International 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.