The Catapult Group International Ltd (ASX: CAT) share price has been amongst the best performers on the All Ordinaries index on Friday.
At the time of writing the sports analytics and wearables company’s shares are up 27% to 81.5 cents.
Why is the Catapult share price racing higher?
Investors have been fighting to get hold of Catapult’s shares this morning following the release of a COVID-19 business update.
According to the release, Catapult’s customers have continued to use and purchase its solutions despite the suspension of most sporting competitions following the coronavirus outbreak. Management notes that this is due to athletes preparing to return in peak condition once competitions recommence.
However, it acknowledges that the immediate COVID-19 crisis may impact the timing on purchasing decisions by some of its customers.
Given the delays and temporary closures of many sporting bodies, the company anticipates fourth quarter FY 2020 new sales growth to be negatively impacted.
Positively, it is confident this will not impact its long-term sales trajectory nor the value proposition its products and services offer customers. It also notes that 75% of its revenue is subscription-based and on long term contracts. The majority of which is in US dollars, which means the company is benefiting from the weakening Australian dollar.
Another positive is that although the company’s supply chain has experienced some delays, its overall impact has not been material.
Strong balance sheet.
Catapult started the second half of FY 2020 in a strong financial position.
Its balance sheet included $24.7 million of cash at bank, after delivering positive free cash flow of $13.6 million during the first half.
It has, however, decided to be prudent and has drawn down US$5 million from an existing debt facility. This leaves it with a current cash position of over A$30 million.
Catapult’s CEO, Will Lopes, remains positive on the future.
He said: “Despite the recent disruption this crisis caused in sports, Catapult remains focused on delivering on its mission and strategy. We are the global leader in solutions and products that help teams and athletes improve performance, on and off the field, a value proposition that will not change. I am proud of our internal efforts to support our customers through this unprecedented disruption.”
“Our strong cash position allows us to navigate this crisis, which will strengthen our competitive position in the long-term,” he added.
Looking ahead, the company reiterated its commitment to positive free cash flow by FY 2021, and remains focused on bringing this forward to the extent possible.
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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.