Why the Catapult (ASX:CAT) share price is racing 12% higher today

The Catapult Group International Ltd (ASX:CAT) share price is surging higher on Monday after the release of a positive business update…

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The Catapult Group International Ltd (ASX: CAT) share price is racing higher on Monday following the release of a business update.

In afternoon trade, the sports analytics and wearables company’s shares are up 12% to $1.97.

What was in Catapult’s business update?

This afternoon Catapult released an update on how it has been performing so far in FY 2021.

According to the release, as of 9 November, the company’s cash balance had strengthened further, rising to US$24 million (excluding drawn loans). This is an increase of US$10.1 million from the end of the previous financial year, which is a big positive given its history of cash burn in the past.

Management advised that the increase in its cash flow has been driven by strong cash collections, and ongoing cost savings associated with COVID-19.

This has been underpinned by sports teams across numerous codes continuing to heavily utilise Catapult solutions during return-to-play programs and in competition. It notes that customer usage of its cloud-based SaaS solutions are higher than the previous year across all individual regions.

And while new business opportunities remain challenged in the current environment, Catapult is utilising its strong cash position and positive cash flow to convert new opportunities and other capital sales to full SaaS subscription-based deals. Going forward, it expects a significant shift from capital to subscription for Performance & Health sales.

Catapult CEO, Will Lopes, commented: “The continued strength of Catapult’s financial position is testament to the resilience and quality of our SaaS business model. This position of strength has enabled us to repay debt and maintain a healthy cash balance.”

The chief executive also revealed that churn levels remain low and subscription renewals are strong.

“Our focus on creating value for our customers with enhanced and innovative new solutions in a COVID environment has driven usage of our solutions to record levels. Although there is short-term pressure on the sport from COVID, our churn remains low and subscription renewals strong. While the signing of new business remains a challenge this year, COVID has not impacted the long term growth potential of the business,” he concluded.

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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. 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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