Straker Translations has reported strong recurring revenue after a period of significant growth.

Technology-driven translations provider Straker Translations (ASX:STG) has seen its acquisition of Lingotek bear fruit, delivering unaudited revenue of NZ$9.0 million, up 19% against the December quarter and 21% in constant currency.

NZ$1.9m of this revenue is attributable to two months of contribution from Lingotek, which is 42% recurring revenue under a software as a service (SaaS) model. SaaS now represents 12% of Straker’s pro forma revenue, reflecting a focus for the business to increase its ongoing recurring revenue.

Overcoming COVID barriers

Despite seasonal slowdown over January and the impact of COVID-19 restrictions in Europe, Straker saw its unaudited total review for FY21 soar 13% to NZ$31.4m and 15% in constant currency. Including a full year contribution from Lingotek, unaudited pro forma revenues have risen to NZ$41.2 million, a 49% improvement on the prior year.

Co-founder and CEO, Grant Straker, said the fourth-quarter results were a reflection of the efforts put in throughout Q3 and reflective of the ongoing opportunities in the business.

“After the intense activity of the third quarter, a period when we negotiated the IBM alliance and the Lingotek acquisition, we have turned our focus onto executing on the enormous opportunities that have emerged from these transformational agreements,” said Straker.

“We are seeing a significant ramp-up in content delivered to IBM since the alliance went live in January. March content volumes are 60% ahead of the content we delivered to IBM in February and we have seen no let-up in this growth since the end of the quarter.

“The alliance has validated the advantages of our technology with a globally significant user of translation services. The partnership with IBM – a leader in AI technologies – will also drive the evolution of the RAY platform and extend our leadership in the translation sector.

“Meanwhile, Lingotek is delivering on our expectations. It significantly builds out our presence in the US and adds more than $11 million in incremental annual revenue. It establishes new relationships with multinational enterprises such as Oracle, Nike and Acquia, all of whom are major consumers of translation services,” he said.

Boosting recurring revenue

Securing recurring SaaS revenue has been a focus for Straker over FY21, improving gross margins across the business and reducing the likelihood of downswings.

SaaS revenue-based businesses are also generally attributed a higher valuation multiple by investors.

It has plans to continue integrating its AI software, RAY, with Lingotek in the second half of the financial year, delivering more return and benefits for clients.

Straker also brought on additional clients during the fourth quarter, adding Panasonic to its SaaS transcription services in Europe.

The company plans to continue integrating across its IBM alliance and Lingotek and deliver more efficiencies throughout the next year, as well as seeking new clients and partners to build its global footprint.

Stockbroker Ord Minnett raised its target price on Straker last month, putting a Buy rating on the stock and setting it at $2.10, a 19% premium on the current price of $1.76.

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.