It has been an interesting 12 months for ASX small-cap Catapult Group International Ltd (ASX: CAT). The Catapult share price plunged around 75% during the broad market selloff last March but has now recovered most of those losses.
At their current price of $1.81, Catapult shares are now back to trading around pre-COVID levels. In September, in the midst of all this volatility, the company’s shares even briefly touched on a new 52-week high of $2.46.
What does Catapult do?
Catapult is a sports technology company. It grew out of a partnership between the Australian Institute of Sport (AIS) and the Cooperative Research Centres (CRC), originally formed with the intention of improving the nation’s athletic performance ahead of the Sydney Olympics back in 2000.
Catapult itself was founded in 2006 with the purpose of commercialising the technology initially developed by the AIS and CRC. This includes wearable technologies like GPS tracking systems that help monitor an athlete’s performance.
It has grown from a small Melbourne-based start-up into a global sports science brand and has worked with sports teams around the world to improve their performance. The company’s clients include English Premier League club Leeds United, and national teams like the Egyptian men’s soccer team and the Swedish women’s soccer team, as well as the Richmond AFL club.
What’s driven the Catapult share price volatility?
The Catapult share price was hit hard by COVID-19. Many sports leagues across the world postponed or suspended their seasons as governments imposed strict lockdowns to halt the spread of the virus. Major international sporting events, like the Tokyo Olympics, were cancelled or postponed.
In a COVID-19 update released to the market back in March of last year, Catapult tried to reassure investors that it was capable of navigating the crisis. It stated that it was in a strong cash position, but admitted that virus-sparked lockdowns would negatively impact fourth-quarter sales.
However, in its FY20 results presentation, Catapult stated the effects of coronavirus weren’t as severe as initially anticipated. Revenues cracked $100 million for the year, jumping 6% year on year to $100.7 million. Underlying earnings before interest, tax, depreciation and amortisation expenses (EBITDA) soared 225% to $13.3 million.
Recent news out of the company
In an FY21 update released to the market back in November, Catapult stated that cost control measures and high cash collections since 30 June had put the company in an even stronger cash position. In fact, the company’s balance sheet was so healthy that Catapult had decided to repay its debt facility – originally drawn down at the height of the coronavirus crisis back in March – in full.
A big part of the company’s success has stemmed from its decision to shift its focus from capital sales towards a subscription-based software-as-a-service (Saas) business model. This has meant the company has still been able to rely on stable cash flows throughout the pandemic and hasn’t been overly impacted by the drop in new business opportunities during this period.
Speaking at the time of the market update, Catapult CEO Will Lopes stated, “The continued strength of Catapult’s financial position is testament to the resilience and quality of our SaaS business model … While the signing of new business remains a challenge this year, COVID has not impacted the long term growth potential of the business.”
Based on the current Catapult share price, the company commands a market capitalisation of around $363 million.
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Rhys Brock 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. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.
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