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Catapult share price in focus after strong FY 2020 growth

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The Catapult Group International Ltd (ASX: CAT) share price will be in focus on Thursday following the release of its FY 2020 results.

What happened in FY 2020?

For the 12 months ended 30 June 2020, the sports analytics and wearables company reported a 6% increase in revenue to $100.7 million. The key driver of this was a 21% lift in its subscription revenue to $77.6 million. This was boosted by new contract wins and a 39% lift in customers with more than one Catapult solution.

This led to Catapult delivering earnings before interest, tax, depreciation and amortisation (EBITDA) of $13.3 million in FY 2020. This was an improvement of $9.2 million and driven by the continued strong subscription revenue growth and a decline in operating expenses.

As a result, the company has now delivered five consecutive half-years of consistent EBITDA growth. Management notes that this is due to its continued focus on efficient implementation of a SaaS business model resulting in higher operating leverage and profitable growth.

Pleasingly, after committing to deliver positive free cash flow in FY 2021, Catapult has achieved its goal a year earlier than planned. Catapult posted positive free cash flow of $9 million, up from a cash outflow of $17.1 million in FY 2019.

Where did Catapult’s growth come from?

Management advised that its subscription revenue growth of 21% was driven by positive performances across all verticals.

Performance & Health grew 29%, Tactics & Coaching lifted 10%, Management increased 26%, and Media and Engagement jumped 27%.

This was supported by continued low churn levels. Despite the pandemic, Catapult recorded ACV churn of 6.7% compared to 6.3% in FY 2019.

Catapult’s CEO, Will Lopes, commented: “Despite our Q4 slowdown, our staff was able to grow subscription revenue 21% from last year and deliver 26 new features to our customers. Our ability to execute in such trialing times is a great sign of our product strength, our employees’ dedication to our customers, and the experience of our executive team.”

Outlook.

Management advised that FY 2021 will be a shorter financial year comprising just nine months. This is the result of Catapult changing to a 31 March year end.

It feels this change and a switch to a USD reporting currency will better reflect its underlying successful operating and earnings profile driven by its growth in the northern hemisphere market.

In respect to its financials, management aims to continue being free cash flow positive in FY 2021.

However, it believes it is too early to comment on revenue growth rates for FY 2021 because of the pandemic. Though, it does expect a decent portion of sales that would otherwise have been made in the fourth quarter to be made in the first half.

Longer term, management expects its underlying revenue growth rate to return to historic levels.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. recommends Catapult Group International Ltd. 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.

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