The Catapult Group International Ltd (ASX: CAT) share price is up 14.6% today (at the time of writing) after the technology company revealed it has been awarded a contract to provide video exchange services to the top 130 United States college football teams. Catapult says its new video exchange solution will change the way content is traded among college football teams and open up new strategic opportunities for the company.
What does Catapult Group do?
Catapult Group creates technology to improve the performance of athletes and teams. This includes wearable technology, video analysis, and athlete management programs. Its products are used by some 2,970 teams and organisations worldwide, including AFL Queensland, Hartford Athletic, and Newcastle United.
How has the Catapult share price been performing?
The Catapult share price took a dive in March but has recovered strongly and is now trading down 12.1% from its February high. By comparison, the S&P/ASX 200 (ASX: XJO) is trading down more than 17% from its February high. Global demand for professional sports has improved in recent months with thousands of athletes and sports teams returning to work.
The company has reported that FY20 revenue is expected to be between $100 million and $101 million. Free cash flow of $9 million was generated during the year, meaning cash flow positivity was achieved a year earlier than forecast. Revenues and earnings before interest, taxes, depreciation and amortisation (EBITDA) continued to grow despite the postponement of many professional sporting leagues globally, This was thanks to the subscription nature of the company’s business model, with around 75% of revenues subscription based.
Catapult adopted a conservative approach early in the pandemic, instituting cost control measures and managing working capital. This ensured it maintained a strong cash position while minimising business disruption. Catapult finished the financial year in a position of strength with $27.5 million cash at bank.
What’s next for Catapult Group?
Catapult continued to win new customers and retain existing customers during recent lockdowns, including landing significant deals in core sports geographies. Delays and temporary closures have, however, shifted the sales cycle for the company. This means a significant portion of sales expected to be made in FY20 are now expected to be made in 1H FY21. Although the sales impact of COVID-19 is expected to linger, the pipeline for FY21 remains strong. The US college football win signifies an accelerated step towards offering a broader platform of cloud services to Catapult customers.
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Kate O'Brien has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of and recommends Catapult Group International Ltd. The Motley Fool Australia 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.
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