The only ASX pure-play technology-driven language service provider is expecting to be both cash flow and EBITDA positive this financial year. 

Straker (ASX:STG) has maintained its robust performance as it enters FY24, reiterating its projections for moderate revenue growth and consistent gross margins, alongside a reduction in operating expenses for the current financial year.

During its Annual General Meeting, the global leader in translation and localisation services also indicated its anticipation of achieving positive cash flow and EBITDA for the fiscal year 2024.

 

Strong start to FY24

Straker reported a robust start to the financial year last month, defying market volatility with steady revenue and continued profitability and the company’s strategic geographic presence worldwide and diverse clientele proving invaluable in navigating variable market conditions.

In the first quarter of FY24, Straker reported revenue of $13.1 million, a 2% increase from the preceding quarter. This performance is particularly encouraging given the challenging market conditions that persisted over the past 12 months, representing the first sequential improvement in revenue since Q1 FY23.

CEO and co-founder Grant Straker expressed satisfaction with the results, emphasising the stability achieved amid highly fluctuating market conditions. 

“The company’s customer diversity has seen us deliver stable revenue, as well as continued Adjusted EBITDA profitability and Free Cash Flow generation. Strong momentum in the IBM business and IDEST were the standouts this Quarter, and we remain optimistic about their future direction,” he said.

Straker encountered market variations, with notable strengths observed in the North American-based Lingotek business, which exhibited growth compared to the preceding quarter, while the IDEST business in Europe performed exceptionally well, achieving a 21% revenue increase compared to Q4 FY22, marking its strongest quarterly result since March 2022.

IBM, a significant partner, contributed significantly, demonstrating solid momentum and quarter-on-quarter revenue growth of more than 20%, albeit slightly below peak levels reported in the previous corresponding period (PCP). Nonetheless, the quarter’s revenue result represented the highest in the past 12 months and became the primary revenue contributor to Straker’s overall quarterly performance.

Gross margins for Q1 FY24 reached an impressive 59%, marking a substantial increase of 400 basis points compared to the PCP. The company anticipates these margins to remain elevated at around 55%, a notable deviation from historical levels.

Straker’s relentless focus on cost management yielded 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 from non-recurring items.

 

Investing in AI for future growth

Straker continued its strategic investments in AI-based research and development during the period. The focus remained on enhancing features for fact-validation and AI-generated content verification. The successful launch of the Straker Language Cloud platform on both Slack and Microsoft Teams platforms was a significant milestone for the company.

Grant Straker highlighted this achievement saying “a significant 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. 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 persisted in Q1 FY24, delivering $0.842 million, representing a turnaround of over $3 million compared to the -$2.3 million reported in the PCP. A pivotal focus for the company remains the generation of Free Cash Flow, and Straker delivered on this front, generating FCF of $0.15 million.

Straker’s balance sheet remains robust, characterised by a debt-free status and cash reserves of $12.4 million. This stability compared to the preceding quarter and substantial growth compared to the PCP underscores the company’s financial strength and resilience in uncertain markets.

 

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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