The Catapult Group International Ltd (ASX: CAT) share price has been a strong performer on Thursday following the release of its half year results.
At the time of writing the sports analytics and wearables company's shares are up over 15% to 71.5 cents.
Why is the Catapult share price surging higher?
This morning Catapult released its half year results and revealed a 42% increase in revenue, and EBITDA loss of $1.4 million, and a net loss of $9.3 million. The latter was an improvement of 34% on its loss during the prior corresponding period. I suspect the market had been expecting far worse, causing a bit of a relief rally today.
Annual recurring revenue (ARR) increased 25% to $57.4 million thanks to a solid performance from its core Elite segment which delivered high growth subscription revenue, strong margins, and low churn. The majority of its core elite revenue is now associated with SaaS software subscriptions.
The Elite Wearables business achieved ARR growth of 32% to $27.6 million and revenue growth of 38% to $19.6 million. Customer churn was 3.5% for the period, down from 8.4% a year earlier.
The Elite Video business grew ARR by 18% to $29.1 million and revenue by 22% to $20.7 million. During the half Catapult continued developing its tactical analytics solution (Catapult Vision) for elite clients and closed its first sales. Management expects Catapult Vision to become a key part of the elite technology stack and will integrate the analytics from wearables into the video interface.
Things weren't quite as positive for the much-hyped Prosumer segment. Whilst it delivered unit sales growth of 2.1x, it was from a low base and well short of original expectations. However, the Catapult board believes the business has a lot of long term potential and is committed to driving "sustainable growth at a rate more consistent with current market maturity and off a significantly reduced expense base."
Looking ahead, the company has reaffirmed its FY 2019 guidance. It expects core Elite revenue growth of between 17% and 20%, underlying core EBITDA growth of between 37% and 63%, and ARR growth above 20%.
The company also provided an update its CEO search following the surprise resignation of Joe Powell earlier this month. A global search is underway and "the Board is confident of appointing a high-quality candidate who can continue to scale the Company and drive further innovation whilst delivering cashflow positivity in line with forecasts."
Should you invest?
Whilst I'm a big fan of Catapult's products, I'm not a fan of the company as an investment. Especially after its CEO quit unexpectedly earlier this month.
According to that announcement, Mr Powell agreed that now is the right time for a new CEO to lead Catapult through its next phase of growth.
It is worth pointing out that he had been at the company for a little under two years after being brought in from SEEK Limited (ASX: SEK). At the time, executive chairman, Dr Adir Shiffman, said that Mr Powell would be "a key driver of our next phase of growth."
Maybe this is the phase that finally delivers for investors, but I'm not overly confident it will be. As a result, I'll be avoiding its shares for the time being and focusing on other tech options such as Altium Limited (ASX: ALU) and Appen Ltd (ASX: APX).
