Straker sees value in current share price, announces on-market buyback

The only ASX pure-play technology-driven language service provider has announced a plan to buy back 5% of the company’s share on issue.

Straker (ASX:STG), a leading player in the AI language services and technology industry, has unveiled plans for an on-market share buyback program.

The move underscores the company’s confidence in its future prospects and comes as the company recently reaffirmed guidance and expectations to be both cash flow and EBITDA positive this financial year.

The buyback of ordinary shares will be capped at 3.5 million shares, representing approximately 5% of the company’s issued capital, a move that signifies a robust commitment to rewarding loyal shareholders. At the current share price, this buyback is valued at approximately AU$1.7 million.

Funding for the buyback will be sourced from Straker’s existing cash reserves, which stood at approximately NZ$12.4 million as of June 30, 2023. This showcases the company’s strong financial position, emphasizing its ability to pursue strategic initiatives that benefit its investors.

Unlocking Hidden Value

The Straker board believes that the company’s current share price does not accurately reflect its underlying value. The share buyback program is seen as a clear opportunity to add value to the remaining shares in circulation, demonstrating the company’s commitment to delivering positive outcomes for shareholders.

Straker Chairman Heith Mackay-Cruise said the program took into account the trading liquidity of Straker’s shares and the board’s overarching goal of maintaining a robust and adaptable balance sheet and allowed Straker to remain agile, positioning it favorably for future acquisitions and new business endeavors.

“Acquisitions have always played a role in Straker’s corporate strategy, and we see few more compelling opportunities at the moment than buying back our own shares,” he said.

“Our large cash balance, zero debt, and a business that is delivering positive cash flow render Straker well placed to undertake this capital management initiative.”

The buyback program is slated to commence after the release of the company’s 2023/24 Interim Result, scheduled for November 28, 2023.

The program will run for a duration of 12 months. The number of shares repurchased, the purchase price, and the timing of the buyback will be subject to various factors, including prevailing share prices, market conditions, the company’s forecasted capital requirements, and unforeseen circumstances.

It’s crucial to note that there is no certainty that Straker will repurchase all or any of the 3.5 million ordinary shares allocated to this buyback program. The company retains the flexibility to suspend or terminate the buyback at any time. Importantly, this buyback initiative does not require shareholder approval.

Guidance reaffirmed

The announcement follows as Straker maintains its robust performance in 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.

Straker reported a robust start to the financial year, 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.

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.