Catapult Sports Ltd (ASX: CAT) shares have burst out of the gates on Thursday morning.
At the time of writing, the ASX tech stock is up 11% to $3.95.
This compares favourably to the ASX 200 index, which is trading largely flat today.
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Why is this ASX tech stock surging?
Investors have been fighting to get hold of the sports technology solutions company's shares this morning following the release of a trading update before the market open.
According to the release, Catapult expects its closing annual contract value (ACV) for FY 2026 to be in the range of US$133 million to US$134 million with low churn. This represents reported year-on-year growth of 27% to 28% on a constant currency basis.
The ASX tech stock notes that this includes ACV that is being contributed by the acquisitions of IMPECT and Perch, and is consistent with its track record of strong, durable subscription revenue growth.
However, management revealed that the integration of those acquisitions has placed temporary capacity pressure on Catapult's finance and collections function.
As a result, a portion of second-half receivables that would have ordinarily been collected before 31 March is expected to be received in early FY 2027. This will result in a materially higher closing accounts receivable balance relative to a year earlier.
As a result, the ASX tech stock expects FY 2026 free cash flow (excluding transaction costs) to only be between US$5 million to US$6 million. This is down from US$8.6 million in FY 2025.
Nevertheless, following the successful capital raise and acquisition of IMPECT, Catapult expects to end FY 2026 with a cash balance of approximately US$50 million and no debt.
Strong earnings growth expected in FY 2026
The ASX tech stock advised that it is expecting its FY 2026 management EBITDA, which is a non-IFRS measure of operating profitability, to grow by approximately 50% year-on-year as its profitability continues to outpace its strong top-line growth.
Management highlights that this expected performance reflects the accelerating operating leverage in Catapult's business model and the company's continued discipline in managing its fixed and variable cost base.
In light of Catapult's management EBITDA continuing to expand, the company expects its FY 2026 Rule of 40 metric to improve on the record 33% that it achieved in the first half of the financial year.
