Why is the Catapult share price tumbling 6% lower today?

Catapult shares are falling on Thursday following the release of its full-year results…

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Key points

  • The Catapult share price is falling on Thursday despite the tech sector racing higher
  • This follows the release of the sports technology company's full-year results
  • Those results revealed solid top line growth but widening losses

The Catapult Group International Ltd (ASX: CAT) share price is on the slide on Thursday following the release of the company’s full-year results. This is despite the rest of the tech sector shooting higher today.

At the time of writing, the sports technology company’s shares are down 6% to $1.08.

Catapult share price lower as losses widen

  • Revenue up 54% to US$77 million
  • Annual contract value (ACV) up 19.7% to US$63.9 million
  • ACV churn down by over a third to 3.4%
  • Underlying EBITDA loss of US$5.8 million
  • Net loss widened by 265% to $32.1 million

What happened during the 12 months?

For the 12 months ended 31 March, Catapult reported a 54% increase in revenue to US$77 million and a 19.7% increase in ACV to US$63.9 million.

However, things weren’t anywhere near as positive for its earnings, with the company reporting a deterioration in its margins. Management advised that this was driven by its additional investment in accelerating ACV growth.

This led to Catapult recording an underlying EBITDA loss of US$5.8 million, compared to positive EBITDA of US$3.5 million in FY 2021 and US$9.4 million in FY 2020.

On the bottom line, Catapult revealed a net loss of US$32.2 million, up from a loss of US$8.84 million a year earlier.

Nevertheless, Catapult ended the period with a strong balance sheet. It reported $26.1 million of cash at bank.

Management commentary

Catapult’s CEO Will Lopes revealed that the company’s shift to a software-as-a-service (SaaS) model is coming along nicely. He said:

With our transition into a fully-SaaS model, we can better serve our customers around the world and provide them the objective data they need for their athletes and teams. As proof, subscription revenue accelerated dramatically after 12 months of strong ACV growth. With the world reopening post-pandemic, sports are delivering excitement and engagement again.

The strong rebound in North America especially, increases our confidence in future ACV growth. In FY22, the P&H vertical has also delivered high growth, and following our acquisition of SBG, we see new demand for our Tactics & Coaching solutions and are starting a second growth engine for the Company. The new customers we added along with new innovations continue to position us well for capturing demand at all levels of sport.

Outlook

Looking ahead, management is forecasting further solid growth over the next 12 months. It is expecting ACV growth of between 20% to 25% in FY 2023 with ACV churn in the range of 4.5% to 6%.

The company also appeared to address concerns that it may soon run out of cash.

It said:

Catapult is confident in its ability to generate strong operating cash flow in the short to long term. Operating cash flow is expected to be positive for FY23. During FY22 Catapult was subject to increasing supply chain challenges and cost inflation. These are expected to continue at a moderate degree throughout FY23, impacting freight, COGS, wage costs, and inventory sourcing. Catapult’s planned organic investments in FY23 are fully funded.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended Catapult Group International Ltd. The Motley Fool Australia has positions in and 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 Scott Phillips.

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