The only ASX pureplay, technology-driven language service provider reported its Q1 FY24 result showing a return to sequential revenue growth.

Straker Translations (ASX:STG) has kicked off the fiscal year 2024 on a positive note, showing stable revenue and continued profitability in the first quarter.

The company’s diverse geographical exposure globally and breadth of clients have proven beneficial amidst variable market conditions.

The company reported revenue of $13.1 million in the first quarter of FY24, up 2% from the preceding quarter.  Whilst modest this was an encouraging sign given tough market conditions that have prevailed over the last 12 months and it was the first sequential improvement in revenue since Q1 FY23.

CEO and Co-founder Grant Straker said the company was pleased with the result, especially in the face of highly variable market conditions.

“The company’s customer diversity has seen us deliver stable revenue, as well as continued Adj EBITDA profitability and Free Cash Flow generation,” he said.

“Strong momentum in the IBM business and IDEST were the standouts this Quarter and we remain optimistic about their future direction.”

 Lingotek and IDEST strength

Straker faced variability across markets with strength the North American based Lingotek business, which delivered growth compared to the preceding quarter, and the IDEST business in Europe, which performed exceptionally well, achieving a robust revenue outcome with a 21% increase versus Q4 FY22, marking the strongest quarterly result since March 2022.

IBM also played a significant role, with solid momentum and quarter-on-quarter revenue growth of more than 20%, albeit below peak levels reported in the PCP.

Nevertheless, the quarter’s revenue result was the highest in 12 months and became the highest revenue contributor to Straker’s overall quarterly result. Straker is IBM’s global strategic translation partner.

Gross margins for Q1 FY24 were reported at 59%, a substantial increase of 400 basis points compared to the PCP, and the company expects them to remain elevated at around 55% compared to historical reported levels.

Straker’s focus on cost management led to positive results, with Adjusted EBITDA in Q1 FY23 at $0.462 million, compared to $1.061 million in Q4 FY2023.

The EBITDA result for this quarter was $0.47 million, benefiting from a relatively clean quarter free of non-recurring items.

Investing in AI

Straker continued to invest in AI-based research and development during the period, focusing on new features for fact-validation and verification of AI-generated content.

The successful launch of the Straker Language Cloud platform on both the Slack and Microsoft Teams platforms was a significant achievement for the company

“A big focus for the company during this and prior quarters has been the development and rollout of the LanguageCloud product offering on the Slack and MS Teams platforms,” Straker said.

“The soft launch on these platforms took place early in the current Quarter and we are excited about their potential impact on revenue as FY24 progresses.”

Positive cash flow trend

Straker’s positive trend in operating cash flow continued in Q1 FY24, delivering  $0.842 million, over a $3m turnaround versus the -$2.3 million reported in the PCP.

A crucial focus for the company is the generation of Free Cash Flow  and the company delivered on this front, generating FCF of $0.15 million.

Straker’s balance sheet remains in outstanding shape, with no debt and cash reserves of $12.4 million, demonstrating stability compared to the preceding quarter and significant growth compared to the PCP.

This article was developed in collaboration with Straker Translations, 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.