Sports performance analytics company Catapult (ASX: CAT) has announced its impressive first-quarter results for the period ending June 2023, i.e. Q1 FY24, signaling a positive trajectory for its financial performance. The Q1 results not only met but also exceeded the Company’s expectations, hopefully helping it achieve Free Cash Flow positivity in FY24. As part of the sports industry, Catapult typically experiences its most significant period of growth in the first half of the fiscal year.

The Company’s growth figures demonstrated a promising trend, with the Annual Contract Value (ACV) experiencing a year-on-year increase of over 20% on a constant currency basis. Plus, its revenue growth exceeded 20% on a constant currency basis, highlighting Catapult’s ability to effectively convert ACV growth into tangible revenue.

Catapult’s CEO, Will Lopes, said, “We had a great quarter across all key growth metrics and continue to see record low levels of churn during one of our busiest renewal periods. Our discipline over the past year to return the Company to be Free Cash Flow positive whilst maintaining strong revenue growth, innovation, and retention continues to bear fruit. We are very well set up to deliver on our guidance.” 

He added, “Although the Company isn’t in the practice of providing quarterly trading updates, on this occasion the significance of our transition towards positive cash flow justified providing a more granular view of how the business is tracking.” 

Catapult’s transition to a Software-as-a-Service (SaaS) business model has been a pivotal factor in contributing to its positive performance. The low Annual Contract Value churn rate observed by Catapult at the end of the quarter was another positive aspect of the report. At under 5%, the churn rate indicates the deep integration of Catapult’s solutions within the workflows of sports teams. Compared to the same period last year, the churn rate witnessed a 12% improvement.

Throughout the quarter, Catapult accelerated its product releases, introducing Vector Core Pro and a new version of its Pro Video Suite for Soccer. 

In its 2023 annual report, Dr. Adir Shiffman, the Executive Chairman of Catapult, expressed optimism about the Company’s growth prospects. As Catapult moves beyond its growth investment phase, he anticipates that each additional $1 of revenue should generate a profit margin of approximately 30% or more, and the second half of FY23 already provided early signs of profitable growth, with a significant US$15.4 million ($22.7 million) improvement in EBITDA.

Notably, Catapult made strategic decisions to reduce accelerated growth investment in certain areas, including employee expenses and general overhead. The company prioritised investments in key product verticals, which continue to drive its core growth engine.

During December 2022, Catapult expanded its debt facility with its existing debt provider, Western Alliance Bank, securing an upsized $29.5 million revolving facility. This move has strengthened its cash reserves, providing improved commercial terms compared to its previous facility.

Overall, Catapult’s Q1 results paint a promising picture for FY24, thanks to its successful transition to a SaaS business model and strategic investment decisions driving it towards positive Free Cash Flow.