Episode 43: Catapult hits US $100M, Guzman IPO, Canva's Rap and Salesforce's Crash
The guys chat about Catapult hitting US $100M revenue, the IPO prospects of Guzman y Gomez, fawn of Canva's cringey rap, discuss the struggles facing Salesforce and Adir gets into ice cream.
The Contrarians catchup
"When people say life is a rollercoaster, I've got a few issues with that. Firstly, a lot of people like rollercoasters." - Adir Shiffman
Three years ago, Adam got stuck at the top of a roller coaster at Sea World due to a power outage and someone got to them within two minutes - “They were incredible, I can’t imagine a more efficient process”.
Adir walked out of a light rail in Sydney (“let's say they were not cheering in favour of Israel”) and was called a genocidal murderer from within a group of 500 protesters who were chanting against Australia and Israel.
Adir also turned on free-to-air TV for the first time and couldn’t believe the number of ads: “I'm going to sound like someone that came from the late 1800s with my comments, or maybe the 1950s. I’m used to YouTube where I pay $2000 a year to skip the ads, or other services where they start to show you an ad but you can skip it after 10 seconds”.
Catapult hits US $100M revenue milestone
Adir is Executive Chairman of Catapult, an elite sports technology platform listed on the ASX with an office in Cremorne, but largely led by a senior executive team based in Boston and London.
The company is best known for its wearable technology seen under the uniforms of AFL and NRL players but, despite being used by almost all elite sports teams in Australia, only about 4% of revenue is local.
Catapult released their FY24 financial results with some big highlights:
Delivered positive free cash flow, reaching $4.6M
Achieved ACV growth of 20% YoY, pushing our revenue past $100M - an impressive milestone for any company
Reached a major inflection point in our journey towards profitability and building a world-class business, retaining 43% of every new dollar we generated in revenue
Moving on from the roller coaster analogy, Adir compares the public-listing history of Catapult in terms of weather: “weather goes up and down every day, but climate gets warmer over time”.
Catapult went public in 2014 because the company needed cash as it transitioned from capital to subscription sales and was “being offered this money on the worst terms by faces in the US and they were going to buy a minority but effectively have control and have preference shares”.
Meta getting revenue from Shopify merchants
Adir shared a post by Fan Bi, who discussed Shopify’s revenue as a way to understand the percentage of revenue being spent on acquisition for e-commerce.
Shopify does around $250B in total GMV, with around 2.3M stores (average revenue per store of $108,695). If you assume 25% of revenue being spent on marketing, and around half of that going towards Meta performance marketing, that’s around $30B spent on the Meta platform by Shopify merchants. Given Meta’s revenue of $135B, that means around 20-25% of their total revenue comes from Shopify merchants.
Adir, looking into the future: “it's hard for me to imagine that Shopify at some point is not going to be building some advanced tools for information to come in to Shopify. Like already a lot of what you check when you're looking at analytics, you're checking in the Shopify platform. And then once they do that, they’re going to say, if you want to use these tools, it's going to cost money, and all that money is going to come from the merchant or from Meta.”
Adam and Adir taco bout Guzman y Gomez’s IPO
The fast-growing Mexican food chain, Guzman y Gomez, announced last week they will list on the ASX in a fully underwritten private offer that will give the business a market cap of $2.2B. And, unusually, this actually isn't a public offer of the shares in the IPO - it’s an IPO, but not to the public.
Guzman's largest shareholder is the very well-regarded Sydney crossover fund TDM Growth Partners, which owns 33% of the business. They first invested in 2018 when Guzman was turning over less than $200 million, and the business has tripled its sales since then. Co-founder and co-CEO Steven Marks will own 9.9% of the business after the float, worth almost $200 million.
The guys discuss whether a CEO should sit on another company’s board, especially when they’re going through an IPO.
Adam said it can depend on the company: “My general view is I don't like execs on other boards. What I hate seeing is like a CFO of NAB on another board, that's unnecessary”.
Adir is skeptical whether this is actually interesting news: “So the thing about these businesses is that there's nothing special about them. And so what I mean by that is not to disparage this particular business, but to say this is just a quick service restaurant business. If I was going to be harsh, I would say they just copied the Chipotle business in the US and brought it to Australia and are then rolling it out around the world”.
The Contrarians discuss whether they’d prefer to buy Guzman y Gomez, Chipotle, or McDonald’s.
Canva creates cringe
At Canva’s recent annual event, the company went viral for a rap about the company’s product updates. It’s been viewed more than 50M times and been described as “the most cringe shit I’ve ever seen in my career”.
Adir said it was cringe, but who cares? “Canva is a juggernaut. They're heading for ever increasing greatness. I think this kind of rap battle is what happens when you lose a bit of self-awareness and you end up in an echo chamber, but I don't think it will hurt them. And ultimately, I think as an outcome, it was probably a positive because they wanted people to know that they're pushing hard into enterprise and for whatever reason, people certainly know that now.”
Salesforce has a very bad day
Salesforce wiped $50B off its market value in one session after reporting first quarter revenue of US $9B, missing analyst forecast only slightly. It was the largest one day drop for Salesforce since it went public in 2004.
The company fired 700 people earlier this year after terminating 8000 last year and, strangely, despite laying off a huge chunk of workforce, Salesforce reported higher underlying OpEx.
Adir can’t believe how expensive Salesforce has gotten: “People think Salesforce is going to be totally disrupted and miss the AI boat. My view is that AI isn’t going to reach anything like what people think is its potential in the short term. I think Salesforce is a great company but I can't believe how expensive it is. I want a young startup to come in and provide 40% of the functionality, but 80% of what I need for like a tenth of the price”.
Five other stories worth following:
Apple’s latest WWDC is next week and predictions are hot with AI-enabled upgrades: Siri’s AI-enabled future, a new Photos interface, AI recaps of Safari web pages, Notes injected with AI, Voice Memos transcriptions, iMessages’ gets an AI makeover, Calendar refresh, Control Center updates, Maps with route creation, and Music with AI-powered playlists.
Claudia Sheinbaum is Mexico’s first female president, beating out Xóchitl Gálvez. Sheinbaum is a Nobel Prize winning scientist, the former mayor of Mexico City, and an ally of outgoing President Andrés Manuel López Obrador. Gálvez is a former Mexican senator, who vowed to be tougher on criminals.
Nvidia CEO Jensen Huang just announced a series of new AI announcements during a keynote at the Computex conference, including next-gen ‘Rubin’ chips, a new AI gaming assistant, and AI tools for creating lifelike avatars. So far this year, Nvidia’s stock has traded nearly 4x the dollar volume of Apple’s.
Paramount Global and Skydance Media have reportedly agreed on terms for a merger after months of talks. The US $8B deal is awaiting final approval from Shari Redstone, the head of National Amusements, the holding company which owns 77% of Paramount’s voting shares.
Boeing scrapped a test flight of its Starliner spacecraft again this weekend barely four minutes before launch due to an issue with a ground computer. Its next launch opportunity will be on Wednesday. Meanwhile, a Chinese spacecraft touched down on the moon Sunday to collect samples of soil and rocks from the moon’s far side.