Catapult Group International (ASX:CAT) FY19 results & outlook


by Jessica Amir

Catapult Group International Limited (ASX:CAT) Executive Chairman Dr Adir Shiffman discusses the company's FY19 results, growth drivers and outlook.

Jessica Amir: Hello, I’m Jessica Amir for the Finance News Network and joining us now from Catapult Group International Limited (ASX:CAT) is Executive Chairman Dr Adir Shiffman. Adir welcome to the network and your share price acceleration of late.

Dr Adir Shiffman: Thanks Jess my pleasure, yeah. We're really pleased with our FY19 results.

Jessica Amir: For first up Adir, before we dive into your results, just start with an introduction to the company for those that are unfamiliar.

Dr Adir Shiffman: Well, Catapult is a global business and world leader in performance technology for sports. So, we've got a range of different solutions, people might be familiar with our technology from the devices that are elite athletics across AFL, NRL etc were while they play, it captures a heap of data and helps us improve their performance, reduce injury. We've got a set of video solutions as well, and other technologies thathelp teams reach their full potential.

Jessica Amir: And now to your FY2019 or the financial year 2019 results, just take us through some of the key highlights.

Dr Adir Shiffman: Well this was a real transition year for us, it's the first year that we have reported a positive group EBITDA,moved into EBITDA profitability. And we went from a sight EBITDA loss to positive $4.1 million EBITDA so that's a $6 million improvement and we also saw 24 per cent growth in revenue and 24 per cent growth in recurring revenue. So, you know as I said, this is accelerating growth across the company and a really positive result for us.

Jessica Amir: And how do these results differ from past Catapult results. You’ve already alluded to this, but could you just expand on that.

Dr Adir Shiffman: Catapult predominately today is a subscription software business, seventy percent of our revenue comes from subscription software. These businesses when they pass the inflection point of scalabilitythey become really profitable, really quickly and generating free cash flow. And we're just at the beginning of that inflection point passing into that scalability. And this EBITDA result is exactly the beginning of that driven by you know, rising growth in sales and falling growth in expenses and we expect that to continue and that gap to continue to widen.

Jessica Amir: And what are the drivers for accelerating revenue growth and how have you also managed to slow growth in expenses?

Dr Adir Shiffman: Well the second question is easy to address. We are passing through this inflection point of scalability and that means that the heavy investment we've made in the past to get to this point, we don't need to continue that type of investment and consequently, the level of growth in that expense line slows because it's not needed. That is exactly what you see with successful subscription software businesses and we are mirroring that well-worn path which is fantastic.

The revenue growth is an interesting story, happily we've seen revenue growth across the business. As I've said, it's driven by 24 per cent growth in recurring revenue. The wearables part of the business that I outlined that grew 33 per cent and we saw accelerating growth across that wearables business as well. And we also 14 per cent growth in our video platform business and the real significant achievement of that video platform business is that traditionally, our customers have been teams in North America but we've launched a product called, Catapult Vision that we continue to enhance, and that has diversified our customer base to a more international team base. And so, we're in the early days of that but we've got high hopes for that product internationalising the business and being applicable for more and more sports around the world.

Jessica Amir: Now you touched on wearables doing well. Could you just explain you wearable technology and how that differs to what’s currently on offer in the market?

Dr Adir Shiffman: So, we're the global innovator, we literally invented this category of technology internationally and hold the patents to the category. What it does is it enables athletes to put on a piece of technology, it’s a small device, they generally wear it inside a compression garment behind, between their shoulder blades. It captures more than an1,000 data points a second and that is streamed to our analytics platform called, Open Field. And various types of coaches use that information to help athletes perform at their best, to reduce injury, to speed up recovery from injury.

And when I speak about us being a global leader in this space, we work with almost 3,000 teams around the world. That was as at the end of FY19. And that includes almost all of the NFL teams, in the US, America football teams, all of the ice hockey teams in the US. We have league wide deals with the AFL here in Australia and aggregated league deal with the NRL in Australia, as well as the ARU, rugby. So you know we are a business with lots and lots of teams working very closely with us around the world. The really exciting thing for us is, the market has 10,000 elite teams, a 180,000 athletes globally so we're just at the very beginning of our journey here.

Jessica Amir: You’ve absolutely tongue in cheek kicked a lot of goals indeed. But just lastly before we let you go, is there anything else that you’d like to touch on today?

Dr Adir Shiffman: The boards sees continued revenue growth of FY20 and continued reduction in expense growth. We're completely committed to recurring revenue. It's a high margin, it's growing rapidly, with a very low churn of teams that churn fell from 8.4 per cent to 5.2 per cent and that's what's going to drive long term value for shareholders. We see a tremendous opportunity, not just acquire teams that don't have any solutions at the moment but also to upsell to our existing teams who are not fully penetrated and cross sell to more than 2,800 existing customers where those teams only use one product. And so we're heavily focused on doing that we're confident of achieving this outlook and we're confident of bring the business towards and through free cash flow positivity as well.

Jessica Amir: Dr Adir Shiffman congratulations on the results and thanks for your time.

Dr Adir Shiffman: Thanks Jess, my pleasure.


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