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Catapult share price lower despite strong first half ARR growth

The Catapult Group International Ltd (ASX: CAT) share price is dropping lower on Wednesday following the release of its half year results.

The sports analytics and wearables company’s shares opened the day 3% lower at $1.80.

How did Catapult perform in the first half?

During the six months ended December 31, Catapult recorded revenue of $50.7 million and annual recurring revenue (ARR) of $68.8 million. This was an increase of 18% and 20%, respectively, on the prior corresponding period.

The main driver of this growth was its Americas segment. Thanks to strong growth in the NAM business, Americas revenue grew 21% to $35.5 million. This means the Americas remains Catapult’s largest and most valuable market, representing 70% of revenue and 45% of its customers.

Catapult’s EBITDA came in a $5.7 million, compared to a loss of $1.4 million in the prior corresponding period. This was driven by continued strong revenue growth and a decline in operating expenses. In addition to this, the company’s Prosumer business cut its EBITDA losses from $3.6 million to $0.4 million during the half following a restructure.

Also heading in the right direction was its net loss after tax. That improved by 48% to a loss of $4.8 million.

Over the half the company generated positive free cash flow of $13.6 million, which left it with a cash balance of $24.7 million.

Customer numbers continue to grow.

Catapult’s global customer base continued to grow during the first half of FY 2020. It was up 19% since the same period a year ago. Another positive was that the company reported a 66% increase in the number of customers with more than one Catapult solution.

Management believes that growing the number of multi solution customers through cross selling is a significant growth opportunity for the future.

Outlook.

Management advised that Catapult remains committed to growing its ARR as its platform expands, improving operating cost efficiencies as it grows, and generating free cash flow.

It continues to target positive free cash flow by FY 2021, but is focused on bringing forward this positive free cash flow target as soon as possible.

Catapult’s CEO, Will Lopes, said: “Catapult’s transition to a profitable and long-term free cash flow positive company continues following our second consecutive half-year of positive EBITDA and a record free cash flow result. As we move forward in creating a comprehensive platform of sports technology solutions for our customers, it is exciting to have such a strong springboard to initiate the next phase of our company, focusing on long-term growth of recurring revenue and free cash flow.”

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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. 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.