Catapult: Turning momentum into muscle

Consistency is more important than quantum. That’s a message we are often delivering to company management teams. Earnings matter. But the multiple investors are willing to pay for those earnings depends mostly on how consistent and predictable they are.

Sports technology company Catapult (ASX: CAT) shows what can happen when management gets it right.

Catapult’s just released full-year result builds on the themes we’ve spoken about before — strong recurring revenue, improving margins, and increasing product adoption across professional sports. But the scale and consistency of execution are now making it harder for the market to ignore.

The company’s Annual Contract Value (ACV), a measure of run rate contracted revenue, passed US$100 million, growing 18% when adjusted for movements in currencies. This was driven by a 9% increase in the number of professional teams using Catapult’s products, alongside a 12% lift in average ACV per pro team. The deeper story, however, is in cross-sell success. The number of multi-vertical customers — those using both Catapult’s video and wearable technology — jumped 53% in the year to 31 March, showing that customers are increasingly buying more of the platform.

That breadth is important. Multi-product customers not only bring in more revenue, but they are also less likely to leave. ACV retention remains strong at 96%. It is over 99% in multi-vertical teams. The product is so integral to the operations of a professional team, very few teams ever turn the solutions off.

On the cost side, Catapult is showing real operating leverage. The company delivered a 65% incremental profit margin, meaning two-thirds of each new dollar of revenue flowed through to management’s preferred measure of profitability. This reflects a deliberate effort to keep fixed costs steady while growing revenue, and it’s working.

Free cash flow came in at US$8.6 million, up from US$4.6 million in FY24 and a big swing from the US$21.6 million cash burn in FY23. The business is now self-funding and generating surplus capital, something investors have long been looking for from the business.

The outlook for this year is unchanged and reassuring. Management continues to target strong growth in ACV and profitability, aiming for 30% management EBITDA margins over time. It’s a bold ambition, but with revenue climbing quickly and costs largely fixed, it’s looking achievable.

We’ve held Catapult for a long time because we believed in its potential to scale efficiently. Last year showed that the journey is well underway. There’s more work to be done, particularly in pushing deeper into cross-selling video products, but the foundations are strong.

Catapult is a globally dominant, low churn, recurring revenue business with high incremental free cash flow generation. After the result, the stock is up 23% in two days and 258% over the past 12 months. That shows the power of consistency. 

Catapult is a clear example of Forager's approach to finding businesses with consistent growth and disciplined execution. Subscribe to our monthly and quarterly reports to discover more stock ideas like this one