Catapult: $100m revenue, $1bn market cap

Consistent revenue growth combines with growing gross margin

I had to take a look at Catapult Sports this week because of its exploding share price.

As an elite amateur athlete*, it’s an analysis that combines my love of high-performance sports with my passion for technology companies.

* probably not true

Catapult has combined hardware, software and science to create a solution that most of us can wrap our heads around because we all understand sports (even if we aren’t big fans). Catapult helps teams and athletes improve their performance.

Summary

Catapult has built a global leader in sports performance, with a solution that generally works across most sports as well as specialist solutions for everything including soccer, basketball, and hockey. It can be used by professionals at the top of their game, as well as amateurs and school teams.

They’ve managed to grow revenue almost every year over the past 6 years, with a bit of a blip due to COVID (the fact that they managed to hold their revenue is impressive).

Now they are at a bit of a turning point where strong profitability and growth is insight thanks to a huge improvement in gross margin and their dominant industry position.

Let’s dive in with the usual format:

1. About Catapult

2. Business Model

3. Market

4. Competition

5. Value Proposition & Product

6. Go-to-Market

7. Finances

8. Key Insights

About Catapult Sports

The company was founded in 2006 by Shaun Holthouse and Igor van de Griendt.

Catapult’s technology came out of work the founders were doing at a cooperative research centre (a collaboration between researchers, government and industry). They’ve also had additional collaborations with researchers, such as a positioning system developed with Australia’s CSIRO.

Holthouse led the company as CEO through it’s listing in 2014, through to 2017 when he handed over the reigns to Joe Powell. Powell ran Catapult from 2017 to February 2019, where the CFO also moved on. The current CEO, Will Lopes, joined later in November 2019 and has led the company since.

Catapult raised $10m from Disruptive Investment Group and Aura in the lead up to IPO. Then, the IPO in 2014 raised $12m. Another fundraise of note is the ~$100m raised to help fund acquisitions in 2016.

They’ve acquired 4 companies over the years:

• GPSSports was acquired in 2014 to consolidate.

• XOS Digital in 2016 to combine a coaching video system with Catapult’s customer data and gain more market access.

• PlayerTek was acquired in 2016 to go into tracking devices for amatuer athletes (consumer market).

Business Model

Catapult has used direct sales and M&A to build a strong base of sports and teams that see Catapult’s technology as the standard. M&A is/was needed because many sports settle on a technology as their standard, making it hard for competitors (even if better) to break in.

From there Catapult has successfully been able to continue to develop its products. In particular, focusing on speciality features for different sports. The success of this aspect of their business model is seen in their increasing annual contract value (ACV or revenue per customer).

Market

The market for Catapult is primarily professional and semi-professional sports teams and organisations. This segments in two ways, by sport and by geography.

Each sports code has differences that need to be taken into account in the product and marketing. Sports codes will also look to what others, usually the best in the code, are doing. Each geographical region will look to what others they know locally are doing and likely need some level of local support.

For this analysis, we will only cover a sample of the sports codes that Catapult pursues and the regions it operates. This will give a sense of the market size but not an exhaustive view.

By Sport

If we look at some of the most popular sports:

• Soccer is one of the most popular sports globally. According to Fifa there are 4,400 professional football teams around the world.

• Cricket: India has ~38 domestic teams, 10 Indian Premier League (IPL) teams. England has 18 professional county clubs. Australia has ~32 teams across the Sheffield Shield, BBL and WBBL.

• Hockey: 32 North American teams, many field hockey teams, and competitions in Europe.

• Basketball: The NBA has 30 men’s teams, the NCAA (American college basketball) has 68 teams, and Europe has 38+ men's teams. Smaller countries, like Australia have their own leagues with more teams (Australia has 9 teams for example).

Most countries also have professional teams in each of these sports. With ~195 countries, according to the United Nations, across just the sports above that is another ~780 teams for country teams.

So our initial, not overly comprehensive or exhaustive list is indicative of 10,000+ professional or semi-professional sports teams from these sports alone.

By Geographical Region

Another way to think about Catapult’s market is by geographical region. Each region tends to have preferred sports.

In North America, there are over 120 professional sports teams. College sports teams also take sports quite seriously in North America, where there are over 600 schools and over 600,000 student-athletes. Division I, the most serious, has 350+ schools and 190,000 student athletes.

In Europe, the major sport is soccer with 1130 clubs (each may have multiple teams) in 33 different countries. Outside of soccer, it is a little more fragmented by country. For example, in rugby France, Ireland and England have ~16, ~4, and ~14 respectively with many more semi-professional teams. There are many more smaller sports like this.

Looking at geographical regions, we see a market of professional teams of over ~2,000 in Europe and North America. With many more countries to consider, you can guestimate that the market is in the thousands if not low tens of thousands once you include semi-professional teams.

Competition

The competitive landscape for sports performance technology has a few dimensions to it. One dimension is the type of value proposition which generally fits into video analytics, wearable trackers and combined solutions. The other dimension is the sport focus of the company, with some focusing on a single sport and others as genuine multi-sport solutions.

Multi-Sport, Combined Solutions

Hudl and Catapult are out competing head to head in the multi-sport, combined solutions (analytics, trackers and more in one platform).

Hudl’s offering largely seems to match Catapult in terms of breadth. Catapult will win some teams or association, Hudl will win others.

Single Sport Specialists

They are up against some very specialised, but mostly much smaller video analytics solutions that tend to focus on a single sport. For example, Zone14 gives soccer teams a 360-degree camera to record matches and then runs analytics through the video, using image recognition technology to identify and track players rather than wearables.

There are also the specialised wearables, like playmaker and STATSports for soccer. These companies have wearables for specific sports or specific issues in sports.

General Solutions

Outside of the solutions focused on sports, you also need to consider the competitive impact of more general solutions. There are general video editing and playback tools like Adobe and VLC. There are general wearables that can track sports related metrics like Fitbit, Apple Watch and Garmin.

These general solutions can take market share, particularly in the semi-pro teams where money is more of an issue. There are different discussions online of people using VLC instead of Hudl, for example, due to price.

Special Mentions

Champion Data, needs a special mention because it is well known in Australian sports. It could be considered a competitor however, at present, they are strong partners of Catapult, with Catapult supplying Champion Data and the AFL with Catapult’s technology.

The other special mention is for Genius Sports. Genius has compelling size and strong video analytics technology but it appears to be going down a different strategic path with much of its focus on fan engagement and betting. Given we’re focused on Catapult here, I didn’t explore this strategy beyond considering what this means for how Genius’s video analytics competes with Catapult.

Value Proposition and Product

Catapult helps teams and athletes improve their performance.

To improve performance you need real data. But sports teams want to play the sport they’re good at, so Catapult removes the pain of collecting data and making it available for review.

Then this allows them to give sports teams what they really want, the ability to analyse, plan and improve performance. This is delivered primarily through two solutions, monitoring devices combined with video analysis software. This comes together as a sports performance solution.

Go-to-Market

Catapult’s go-to-market is largely a direct go-to-market motion with what seems to be a strong referral base.

There is some leverage gained through partnerships with associations and leagues, where Catapult will approach the league itself to roll the product out to the various teams within a league. An example of this is the partnership with the Indonesian soccer league to roll Catapult out across their teams and help improve the overall professionalism of the league.

There isn’t currently a “self-service” option. The Buy Now still connects you with a sales person.

Finances

The key points of interest in Catapult’s finances are:

1. Consistent Revenue Growth

2. Strong, Growing Gross Margin

Consistent Revenue Growth

If you exclude COVID, which impacted sports substantially, then Catapult has shown an ability to consistently post revenue growth.

Gross Margin

Gross Margin is strong and has grown every year. Strong, growing gross margin combined with growing revenue means strong profits are easy to make happen.

There is a small level of scepticism over this gross margin though because Catapult also reports “Contribution Margin” without too much explanation as to what the difference is between Contribution Margin and Gross Margin for their business. It could be that their gross margin is much lower at around 45% up from 33% in the prior financial year. If this is the case, the growth here still points to the ability for Catapult to product stronger profits in the future, especially with the revenue growth they have.

Key Insights

There are some key insights we can take away from Catapult:

1. M&A helps: M&A has helped Catapult establish beachheads in different sports in different regions as well as provide innovation to existing customers. There is even an example where it didn’t work (prosumer) but overall this strategy has helped propel them.

2. Direct sales: going direct and finding points of leverage, like partnerships with leagues and associations, works to drive revenue. But, it’s also come at a substantial cost with Catapult not turning a profit in a while.

3. Sport focus: choosing which sports to focus on seems like a key strategic question given competitive pressure from Hudl as well as specialist providers.