Technology-driven translations provider Straker Translations has significantly increased its SaaS revenue following a successful NZD$25m cap raise.

New Zealand-based Straker Translations (ASX:STG) has reported strong growth in revenue for the first quarter of the 2022 financial year including an unaudited revenue of NZD$11.4 million up 49% on the prior corresponding period.

Revenue from its strategic alliance with IBM is up 157% on Q4 2021, and gross margins improved 57% ahead of the 48% in Q1 2021 and steady against the 58% achieved in Q4 2021.

Following a recent, well-received capital raising, Straker Translations reported a strong balance sheet with no debt and cash reserves of NZD$22.1 million and a total cash inflow of NZD$14.9 million following June’s NZD$25 million equity capital raising.

Co-founder and CEO of Straker Translations, Grant Straker, said the company is benefiting from the full contribution of its recently acquired US business Lingotek and a ramp up in content linked to its strategic alliance with IBM.

“I’m very pleased with the stellar growth of the company this quarter, including the success of our NZD$25 million equity capital raising in June which has strongly positioned us to accelerate growth strategies,” said Straker.

“Our unique RAY and Lingotek technology platforms continue to be a competitive advantage, and we have also seen strong organic growth due to the transformational strategic translation alliance we struck with IBM.

“We saw revenue up 27% sequentially, principally reflecting the rapid increase in revenue from this alliance, which went live in January 2021.

“IBM content volumes in Q1 2022 are now substantially ahead of content volumes in Q4 2021 and we expected continued growth throughout the current financial year.

“We’re looking ahead to the rest of the year with confidence and will be focusing on driving the adoption of translation technology among global enterprise customers, increasing our share of the translation spend of existing customers and driving consolidation of the global translation sector.”

 

Growth highlights tech advantage

Lingotek has delivered Straker new SaaS capabilities, which over the longer term will be a key driver of margin improvements across the business.

During the quarter, Lingotek benefited from new contract wins, including Panasonic as a SaaS customer in Europe, and a renewed SaaS contract with sports goods manufacturer Nike, a marquee enterprise SaaS customer, for a further year. Growing its SaaS revenue is a key priority for Straker – and that’s not surprising, with the market rewarding SaaS companies with hefty revenue multiple based valuations.

Straker Translations’ ability to secure SaaS contracts with enterprise customers has been significantly enhanced through its successful ISO27001 certification, the gold standard for information security.

Additionally, its success with IBM continues to validate the advantages of its technology and transnational reach with a globally significant customer and leader in AI technologies. The alliance is driving industry interest and Straker Translations has added three new enterprise sales team members with a focus on enterprise growth.

Straker Translations’ R&D team remains focused on linking Lingotek’s powerful suite of translation connectors and IBM’s systems with the RAY platform.

 

Capital Outlook

Straker Translations’ strong balance and successful track record of integrating well priced acquisitions puts the company in a strong position to lead consolidation in the sector.  M&A is likely to remain an important feature of its strategy as it seeks to add key pieces of technology or flagship Enterprise customers to accelerate growth.

The company forecasts sales for FY 2022 to exceed NZD$50 million with a margin exceeding the 53.4% recorded in the FY 2021 year.

Straker said with the support of shareholders, the company was well-positioned to deliver on commitments to IBM and other enterprise customers.

“We are looking forward to an easing in Covid-19 restrictions to drive improvements in trading conditions in the coming months. Our new hires in  Europe and  North  America are already yielding a growing sales pipeline,” said Straker.

This article was developed in collaboration with Straker, a Stockhead advertiser at the time of publishing.

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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