Hello, and welcome to Catapult's earnings conference call for the first half of fiscal 2022. I'm Andrew Keys, and I'm facilitating today's call. Catapult's CEO, Will Lopes, and CFO, Hayden Stockdale, are on today's call. Will and Hayden have pre-recorded a video which goes through the results presentation on a slide-by-slide basis. We encourage you to watch the video for complete context on the results. There is a link to the video at the bottom of the results press release lodged with the ASX, and it's also accessible through the investor news section on the Catapult website. I'll now hand over to Will, who is in Boston, before we take your questions. Good afternoon, Will.
Good afternoon, Andrew, and thank you. Thank you for all who are joining us today, as well as, good morning, for those of you in Australia, and as well as, good afternoon for all of those of you here in North America. I'll do, you know, just a maybe perhaps a quick recap of this half-year results, and then I'll hand it back to Hayden, sorry, Andrew for some Q&A, on it. I think the, you know, first, I think the theme, for us here at Catapult, I think, is really that Catapult has emerged stronger from the pandemic and global growth is accelerating and reaching record levels. Our ACV is up 43% with all regions performing really, really strongly. Our performance and health vertical had a full organic growth of 40% year-on-year. Tactics and coaching grew 57%, and that was supported by the acquisition of SBG.
Our subscription revenue accelerated dramatically to 29%, up from 3.3% in fiscal year 2021, following really 12 months of strong ACV growth. That, to us, was really pleasing because subscription revenue is the lagging metric to our leading indicator of ACV. Our underlying EBITDA remained positive at $ 1 million, despite the increase of R&D and our transition to a full SaaS model. Another theme for us here is that we have transitioned to a global SaaS business. Subscription revenue now stands at 86% of total revenue, up from 79% in fiscal year 2021. Our gross margin of 73.5% is strong and has room to improve over the coming years. Annual ACV churn fell down to 4.1% at a record near record lows. Our high ACV growth will drive future years of subscription revenue, which we're very excited by, the ACV growth that we're seeing.
Another theme, I think, from this half-year results is that we are the leading vertical SaaS solution for elite athletes globally. We're seeing strong global growth across all regions, specifically great results in North America this past half. Strong growth with our performance and health vertical, which is driving really our land strategy. The SBG's integration and growth is well ahead of plan, and improving our expand strategy and supporting ACV expansion going forward. We've had strong growth in multi-vertical customers, up 50% year-over-year, as we've successfully driven new sales, particularly in that performance and health vertical customer base. I will say the last, you know, sort of theme here is that we're fully funded with $42 million cash at the bank to continue to accelerate our growth initiatives.
You know, as if you had a chance to watch our Investor Day, that bodes really well because what we're trying to do is grow into that very large and sizable TAM of, you know, over $2 billion in professional and $40 billion in prosumer. We see the potential, given these half-year results, to really be the foundation of not only near-term growth, but also long-term growth. We're, you know, I couldn't be more pleased with how this half had ended. I think I shared. I think in the last half year results that, you know, I came to Catapult to really drive significant growth, turn and transform this business to a full SaaS model.
I think at least in this half, we're very excited that we're doing both of those in an incredible manner. With that, I'm gonna hand it back to Andrew so he could kick off you know, sort of our Q&A session.
Okay. Thank you, Will. For attendees, if you'd like to ask a question, the choice is yours. Pop it into the Q&A function and I'll facilitate that, or alternatively, please raise your hand in Zoom and we'll bring you into the call. We've Michael Aspinall from Jefferies is on the line and raised his hand. Michael, you need to unmute your line at your end.
That should have worked. Is that coming through, guys?
You're on, yes.
Yeah. Cool. Just a few from me, mostly focused on kind of sales. Firstly, can you just walk through what you're seeing at the various stages of the sales hopper and pipeline?
Yeah. What do you mean by that? What are we seeing? Just in terms of strength or?
Just in terms of, say, the number of teams you've got at the top of the funnel for the kind of the sales pipeline and how you see them progressing kind of down the funnel through to coming to customers?
Yeah. Our pipeline actually continues to remain strong. I think, you know, what part of, you know, maybe that outlook statement was when we look at the pipeline as it stands today, you know, we feel pretty confident that our ACV growth will continue at this sort of strong trajectory going forward.
Okay. Maybe another way then. Historically, Northern Hemisphere summer has been the key selling season. Does that change at all with SBG? How should we think about kind of the seasonality of new customer additions in the second half or ACV growth in the second half?
Yeah, that's a good question. I don't know if it changes the seasonality of, you know, sales in terms of teams, right? Reality is that we typically go out and are dealing with customers during their off-season and all the way to, you know, typically pre-season. What we are starting to do in the Southern Hemisphere is actually start to introduce a lot of the SBG product suite. And, you know, not only bring that along with our performance, but we're feeling, you know, the performance technology really good at that integration and how well it's going at this early stage. I think we'll learn from the Southern Hemisphere sales cycle right now.
I think, you know, what we're doing at this stage, and maybe this goes back to maybe, like, I think maybe what you're trying to ask Michael, is that we are using this period to ensure that our pipeline, in terms of SBG product suites, as well as the performance vertical, you know, is getting filled, you know, appropriately, particularly in the Northern Hemisphere. We are having conversations, for example, with American football teams when, you know, we get their time 'cause they're all in season right now. We're having conversations here with, you know, baseball teams, hockey teams, same thing with European soccer.
We did a conference actually just last week, where we actually started to show how we're gonna integrate performance data into the product suite of SBG, which was very well received by our customers there. We are building that pipeline and, you know, what we see today feels pretty good.
The one thing to add to that is motorsport, where the global selling season is our second half.
Okay. It sounds like plenty of opportunities there to grow ACV in the second half as well.
Yeah. We're feeling pretty good about it.
Yeah.
Okay. Just in terms of the process of integrating, you kind of touched on it then, of integrating SBG into kind of the existing CAT sales discussions or the sales force. What kind of work have you done there to enable those guys who are talking to customers to sell that product?
Yeah, it's still early days for us. I think what we've done is basically utilized you know, pretty small sales force out of SBG to become sort of the trainers inside the organization. They've been actually having, you know, quite a good amount of discussions with our existing sales team that was here at Catapult to basically get them ready to have conversations of the product suite, and then specifically, how do you use that product suite in sports that, you know, in some cases we don't even support yet, right? You know, for example, we've utilized that team to train around basketball, you know, as you saw from the deal we did in APAC. In some cases, they've been part of those discussions early days, so that you can kind of see how the interaction goes. We've done the same here with American football.
We've done the same with some NCAA university clients. We've integrated a lot of those conversations with the European soccer teams because they're in the same time zone. We're feeling, you know. Obviously, the other component to it is, as a product marketing section, we've now actually started to pull in all of the SBG product suite and sort of the value proposition that we, you know, bring with it and include it in our product marketing, you know, components, whether it's a brochure or whether it's the website, to basically get fully integrated into it.
Okay. Great. Last one from me. Just, can you just give us a bit of context around what you've achieved on the R&D side of, you know, moving towards that data fluency kind of goal you have?
Yeah, so I think there's been a couple of things. One, I think has really been, you know, the first and I think probably most important thing for us was to integrate the data that we have for performance analytics into video analysis. We're actually going into beta, you know, fairly soon, with the integration of that. That was what we had previewed in the conference, you know, that we did in the U.K. last week. We anticipate that product will come live before the end of the year, so we're feeling pretty good about that. The second area of, you know, data fluency is really making sure that we're pulling data into the cloud, and really starting to, you know, work hard on that.
We've invested actually quite a bit in terms of hiring the right engineering team. We've added, you know, a new CTO in the last six months. Just most recently, we've added another chief architect here in Boston to kind of help drive a lot of that. We anticipated that integration of having, you know, data in the cloud at a significant scale is something that, you know, we have a clear line of sight for basically the sales season effects here in the Northern Hemisphere.
Okay. Great. That's useful. Thanks, guys.
Okay, next question comes from Julian Mulcahy at Evans & Partners. Julian, can you unmute your line, please?
Hi, guys. Just a few from me. Firstly, just on the reported EBITDA, you commented that it was the less than expected negative impact from the sort of investment brand. Can you kinda explain why it was less than expected? Is it just a timing thing or you actually did better than you were hoping for?
Sorry, Julian, I didn't catch the full question. Less than expected because of the?
Oh, because of the increased investment.
Oh, okay. Yeah, it was, I think twofold. One, the trajectory of the investment that we made, you know, we effectively only had three months of the year to really do that from the date of raising the funds. It probably took a little bit longer to put the foot down on the accelerator there than we'd expected. Just also secondly, more generally, I think the operations of the business performed more strongly, you know, were just a little more efficient than what we'd expected to be.
With that, the sort of $25 million sort of ramp-up you've called out, what's the sort of timing? Is it the big increase this half, or does it extend, you know, evenly over the next sort of 18 months?
No, I think you'll find it doesn't get all added on evenly and straight away. There is a ramp-up to it. Absolutely. Yes, it probably took, you know, slightly longer in those first few months to sort of get to where we wanted to in that trajectory. Look, the overall program we anticipated was gonna be, you know, circa two years, and it's still circa two years.
Right. Okay. With the change in, you know, capital sales from wearables from capital to subscription, did you find that you kept all the teams that would have been potentially capital sales customers, and they were happy to take subscriptions?
Absolutely.
Yeah, I would say there is nothing here so far that we're seeing where subscription sales has resulted in a lost opportunity for us.
Right. Okay. Have you had to, like, improve your sort of, or sharpen your pricing on bundling to keep those customers?
No.
No. In fact, the opposite.
No.
I think, you know, the impetus behind changing the financial year-end was to avoid certain discounting behavior. We were, you know, very disciplined in what we did around 30 June and also around 30 September.
Right. Okay. The capital sales, so it's essentially XOS hardware. Do we just see that as that's the ongoing level of what it is now, and you increasing subscriptions is what drives that growth that's 95% of revenue?
Yeah. Yeah. I think the hardware sales that we still have left over is typically hardware for XOS for the Thunder analysis. There's small stuff that comes in related to you know device replacement in some cases you know new vests and so on but they tend to be fairly small. I think you know our focus has been on growing that ACV number which is now driving subscription revenue and particularly the you know sort of the high growth that we saw. We anticipate that as that continues to grow the percentage of hardware revenue that will remain within our P&L will diminish.
Right. Okay. It's really good to see, you know, the cross-sell continue to improve, and you're up to sort of 9% now. When do you think it goes vertical? I mean, SBG's clearly been a game-changer product. It's not gonna be going up 2% every half. When do you think it goes vertical?
Yeah. It's I would say that our focus at this stage is to ensure that, you know, what we acquired with SBG is fully integrated. Ensuring that that integration happens as quickly as possible is where our heads are, you know, are on. You know, I'm the CEO, so my patience is always, you know, not Nothing's fast enough. I wish it was, you know, tomorrow that everything goes vertical. I think the reality is that we need to let the software integrate. The sales cycle also dictates some of that. Even though, you know, we may have a great integration ready to go, you're not gonna be able to talk to every football client, American football client, for example, tomorrow.
You know, you gotta follow that sales season. I think we'll have a significant improvement in what we could sell from a multi-vertical perspective this coming year, from a calendar year, and I think that will only accelerate the following calendar year even more so.
Yeah.
Just finally-
Just to add to that, Julian, I think there's a combination of two things really. One is the product suite that we have, we expect that to get a whole lot more exciting fairly soon. Two, we're doing a lot of work internally on ensuring that we're getting the go-to-market strategy right, not just at the elite level, but also at certain levels below that. I think the combination of that you will find at some point will accelerate that multi-vertical number in a very exciting way.
Are you talking about new products you've developed internally or acquisitions?
Well, no, I'm just talking about, you know, feature sets and the integration of various things and just the customer appeal that we'll create.
Okay. Just finally, with the prosumer, you moved to subscription model now, and you said you're getting a good interest from new individuals and teams. Can you put some numbers around the actual units?
Not at this stage. I think what you could see there is just kind of where the ACVs is landing, and I think where you know where the revenue used to be and where it's growing. It's still really early for us. I think what we were trying to show there is that you know so far it's been really positive. You know, again, early stages, right? It was done in the late end of the half. But I think our ability to see the level of activations that we're seeing, see the retention levels that we're seeing, usage patterns, have all been actually you know a little bit above expectation. Again, still early, and I think, you know, we'll continue to deconstruct that, particularly as we, you know, bring the applicability of our solutions from the professional side down into the prosumer side.
Thanks, guys.
Okay. I'm gonna go to the Q&A chat. Some questions here from Owen Humphries from Canaccord. The first one, thinking about the outlook, can you help us quantify a range for what ACV growth will be strong in the short to medium term, in inverted commas? Does this imply a growth rate similar to that delivered in the first half?
I think what we're trying to ensure that outlook statement says is, you know, look, we're driving growth at a very high level. You could see where that looks like on a pro forma basis, where we feel, given what we presented from a TAM, a market size potential, there's nothing that prevents us from growing at the levels that we are. We're feeling pretty confident that our growth rate is gonna continue at a strong or at least at a strong pace for the near and the long term.
Okay. Thanks. The second question from Owen is relating to OpEx, which increased excluding SBG, he said $11 million, versus first half of the prior year. Have you seen any benefit of this investment, or is that gonna be realized in calendar year 2022, and how much was catch-up investment?
Yeah. I mean, you know, I always say, you know, 30% on a pro forma basis growth of ACV subscription revenue kicking in at 29%, churn at 4.1%, you know, multi-vertical customers growing at 50%, more positive EBITDA than we anticipated, which came through some efficiencies improvement on our, you know, sales and marketing as well as some R&D, are all benefits of the investment we're making.
Thank you, Will. Question from-
Maybe just to add a little bit of color there. I mean, there were some one-off costs there. When you actually read into the detail of the report, you would have seen, you know, those half million worth of costs relating to the SBG acquisition. You know, we did spend a little bit more on travel, for instance, as you know, we came out of the pandemic. There was the return of some of those things. There was also certain costs that we incurred this year that we didn't last year with the COVID savings we had. We haven't explicitly broken all of those out. You know, we're sort of getting back to closer to where sort of a run rate would be, albeit you have to strip out some of those one-offs.
Okay, thank you. A question from Raymond Jang in regards to customer service support levels. Are you seeing the level of customer support provided to teams slowly drop over time as the customers become more familiar with using the solutions? Do you need to constantly provide training and help them with insights?
It's almost like two separate questions, really, right? Established customers are actually, you know, not requiring the same level of support that I think non-established customers do. There's always some high level of high touch, particularly at the very top of the elite sports pyramid, where you're spending a bit of time on the preseason and the postseason components to ensure that things are ready, things are set up. That, you know, I think has improved over time, but I don't think enough, given sort of our view on it.
I would say from new customers, I think we've done a couple of things that have helped onboard customers a little bit better, but I think that's still an area of good opportunity for us from becoming more efficient, becoming more customer-friendly. You know, ideally, you know, I always say that, you know, great customer service is you have no need for customer service. I don't think we're there yet.
Okay, thanks. Maybe a question for you, Hayden, from Raymond Jang also. The 50% increase in the number of multi-vertical customers, how many of these were from teams on SBG's customer list?
When we acquired SBG, there was just short of 100 customers. I think it was closer to 80-90. 25 of those, I believe, were existing customers of ours. There was a number of 25 there.
Okay. Thank you. Question from Stefan Stevanovic relating to revenue from the media engagement vertical, can you provide a bit of color on where that revenue is coming from, the type of content that you're providing, the level of investment you're making in that area, and what is the focus in that area going forward?
Yeah. A lot of that revenue is driven by three areas, right? It's, we have deals with NCAA conferences where we have rights to basically monetize their video content that isn't used for live games, and so sort of post-game components. We'll basically monetize that in helping, you know, other media use content that they're trying to, you know, whether it's a commercial, for example, that somebody wants to use footage of a football game. March Madness is typically a, you know, a good example of, I wanna use footage of, you know, the Kentucky basketball team, or I wanna use footage of, you know, the football team down in Florida, and I wanna use that in a commercial setting. Another is that there will be utilization of that content for just, you know, engagement and video and content websites.
The Bleacher Report, I wanna actually show highlights of last week's game, and I wanna actually, you know, use the content that Catapult has access to for it. In some cases, they're very specialized. For example, we have, you know, an agreement with the NFL where we build packages of video content during the draft season that we create with basically, you know, content that was coming from the football area. The great aspect, I think, of this business in many ways is that a lot of the tools and technology they're using are really tools and technology that have been built for the purpose of tactics and coaching. The level of investment in terms of an R&D perspective is very low. It does create a very profitable part of the business, on it.
I think there is the opportunity to utilize a lot of what we have there from a license, you know, video content perspective, to actually integrate it more into other parts of our business, and we're actually doing a deep dive on that, you know, as we speak. We see future potential here. It's not a core part of our business today. It's something that, you know, I think I would like to see it more integrated into the core part of the business. So far it continues to deliver, you know, some really good results. I don't know, Hayden, if you wanna talk about the total numbers specifically 'cause we, you know, I think this time you actually touched on it in the P&L discussion.
Yeah. Look, the numbers are still small, you know, on an annual basis. It's less than $10 million worth of revenue. And as you'll see in the materials as well, you know, the gross margins tend to be circa around the 50% mark. The one thing I'd point out there, though, is you know, some of those initiatives that Will has been speaking about how we sort of grow that business potentially, they are more SaaS in their nature. And so we are hopeful that any of those initiatives would be at a higher gross margin. Look, the existing business we have there, you know, we've got some fantastic relationships, not only on the college side, you know, really the owners of the content, but also the consumers of the content, whether that be, you know, the YouTubes, the Hollywood studios, and the like.
That element of the business, you know, it can go up and down sort of from year to year, depending on circumstances. I think what we saw this year was really, you know, some strong growth on that. These are sort of where we were two years ago, and one year ago, and that's been pleasing.
Okay. Thanks, Hayden and Will. A reminder for attendees, if you'd like to ask a question, please drop it into Q&A or raise your hand, and we'll bring you into the call. Another one from Raymond Jang about SBG and the video capability. Will, what differentiates it from other offerings in the market? A reminder about its benefits.
Yeah. I think the major feature that I think has come with that products, you know, software product suite, is their ability to actually integrate multiple data sources and actually bring that to life over video, right? It allows to actually give really two sort of great benefit to the end user. One is that it improves the workflow speed. If I have data, I could actually dissect the video that I wanna review with my athlete, my coach, my training staff very, very quickly. I could actually package that up for, you know, different workflow streams, so it saves a ton of time. It's really sort of, you know, the one component.
The second is really that now because of all these data sources coming in, it allows for the suite actually in itself to find new algorithms and really drive new insights in terms of how somebody could play, you know, review what's happening on the screen. A good example of this to us is, I think what they started to do initially with Formula One. They were bringing in data from the car, then they started to bring in, you know, event data that was happening on track. They also brought external data such as, you know, temperature of the racetrack, weather patterns, et cetera. As they put all of those things together, they were able to create algorithms that predicted the outcome of the race.
They do that about, you know, in a single race, about 2 million of those predictions. They're giving basically the, you know, the people on the side of the track the ability to actually make better decisions based on what they're seeing, you know, from those outcomes or and those predictions. Now they've turned that into basically the same sort of predictive algorithm for other sports, right? They started with soccer in particular. What we're very excited by is the fact that we now integrate our wearables data into that. Not only bring that from a game day perspective, but also training day, and really start to bring some of the insights that we see from a, you know, performance of the athlete.
You start tying that to the tactics, and it really starts to create really something that's unique in the market overall. Not only can we save time from that workflow perspective, but the insights that we can bring to market over video becomes unique, and really differentiated.
Thank you. Last call for questions. Reminder for attendees, please drop questions in the Q&A or raise your hand in Zoom. Otherwise, we're getting very close to the end of this call. One moment. No. No hands raised.
I think there was one from Julian.
It's not there now. He has come back in. No? Yep.
He's raised it a third time. I think he wants a question.
Back to you, Julian.
Can I just, Will, with that, the predictive aspects that SBG provides the rest of the business, can you just. When wearables were first getting rolled out, you know, you had your old-style coach would, you know, "Don't give me data, just give me 100 pushups and run laps," sort of stuff, you know, they've gradually got with the program. How quickly do you think they'll transition to looking at predictive algos in sports where they haven't done it before?
You know, I think it will be a much faster transition than, for example, you know, how they were waiting to accept performance data just from a training perspective. 'Cause what you'll be able to show, particularly with overlaying this in video, is actually the impact that it has on the, you know, the tactics, right? The coach cares deeply about the tactics. They wanna see if we're gonna create a, you know, a pressuring situation, for example, in soccer, where I want the attack, you know, the offense always you know heading as hard as they can on defense, even when the defensive team has the ball.
If you can start to show over video when an athlete isn't perhaps capable of actually being in that situation because fatigue or because of, you know, you know, potentially, you know, muscle or some other form of injury, that allows them to actually think and have a better decision process in their tactics. It's not. Then it becomes less about, am I training, you know, athlete A better? It's, I actually can win with the tactics given what I see in performance on video. We actually presented that, what I just described as an example. That's one of the things we presented at this conference. What we saw was just not a reaction from, you know, the video side of the sports team or the performance side of the sports team, it was actually the coaching staff that also said, "Wow, this is actually unique".
Cool. Thanks, Will.
Thanks, Julian. Now that brings us to the end of Q&A. Reminder for all attendees, Will and Hayden have produced a video to accompany the results presentation, and they walk through each part of the presentation slide by slide. You can access that from a link at the bottom of the ASX press release, and also on our investor center under the investor news section. Will, I'm gonna hand back to you for closing remarks. Thanks, Hayden. Thanks, Will.
Yeah. Thanks everyone for joining. I think also, you know, worth pointing out that this half-year results came on the heels of us presenting and doing an investor day just about a week ago. Actually, we presented really some great set of information about TAM, our strategy, the market size and its potential that I think really puts these results, I think, in a context that shows that not only are we, you know, growing globally and accelerating that growth, but really at the other side of this is a market potential that I think is significantly larger than many had probably even anticipated that Catapult could reach.
It's really made us all here at Catapult, you know, excited to share that information, and I highly recommend, you know, watching and reading at least the slides that came out of that. I think just from a closing remarks, I think I'll, you know, just reiterate, I think that, you know, we couldn't be more pleased with what we're seeing. I think we're, you know, we've now really transitioned the company to a full SaaS model, and we've done so in many ways, managing, you know, sort of our EBITDA and our, you know, contribution margin in line, where we were prior to this transition. You know, we're growing across the globe. I think, you know, the ACV of 43%, even on a pro forma basis at 30% is just fantastic.
I think I would say that, you know, we really have emerged quite strong out of this pandemic. With teams and leagues playing back in front of fans across the globe, I think the opportunity ahead of us continues to be strong. As a matter of fact, I think it's actually much stronger today than it was, you know, a year ago, and it's definitely much stronger than it was two years ago. With that, I'd like to thank all of you for joining. Thank you, Hayden, for, you know, stepping in there as well. Thank you, Andrew, for managing the Q&A session. Enjoy the rest of the morning, and have a great afternoon.
Awesome. Thanks, all.
Thanks, guys.