Straker reports stable Q3 revenue & record gross margins

Straker, the AI-driven language and content services provider, has reported stable revenue, sustained profitability and record gross margins for Q3 FY24. There has been a year-on-year dip in revenue which reached $12.87m. However, revenue saw a rise of 3.5% compared to the preceding quarter, hinting at a stabilisation in market conditions.

The gross margin exceeded expectations, registering a whopping 65.4%, an increase of 790 basis points (bp) from the same period last year and 240bp up from Q2 FY24. Straker's managed services have made significant strides, contributing to the gross margin upswing. The adjusted EBITDA was robust too, standing at $1.356m ($3.0m Year-To-Date) as against the negative $0.195m in the prior corresponding period (pcp). This figure is also higher than Q2's $1.21m.

Technology-driven automation efficiencies have enhanced productivity while lowering translation production costs. The December quarter saw a 3.5% growth in revenue from Q2 FY24, but 4.7% less than the pcp. There was a market variability in the first half of FY24, with strength coming through from some regions and weakness from others. Q3, however, noted an evident improvement and stability, especially in the European market which reported a 12% increase from the preceding quarter. Revenues from IDEST remained stable in Q3 after a decline in Q2 FY24, with Asia Pacific and North America also maintaining stability.

IBM's contribution to Straker's revenue in Q3 FY24 was significantly higher than the pcp and remained stable compared to Q2. Over 60% of the revenue growth quarter on quarter came from a managed services offering for localisation management. Straker's revenue levels are expected to remain significantly elevated in comparison to the historically reported levels of ~55%.

The company's cost base was reset during FY23, containing overall expenditures. Adjusted EBITDA (unaudited) in Q3 FY24 was recorded at $1.365m. This exemplifies a remarkable turnaround from the loss of $0.195m in the pcp, becoming the highest result in the last six quarters. It showed a growth even compared to the previous quarter in spite of lower capitalised R&D funds.

Straker's generative AI-driven R&D is focused on creating broad-based solutions that support translation workflows, provide instant translations, and deliver insightful data reporting inside the clients' workplace apps. The strong Q3 financial performance has enabled Straker to continue with its market share buyback initiative.

Cash collections in Q2 FY24 were unusually high, leading to a robust Operating Cash Flow (OCF) result. The December quarter saw a cash receipt of $11.86m as compared to a revenue of $12.87m. Cash inflow dropped by $1.25m compared to the previous quarter, largely due to the cash outflow of $1.08m towards the share buyback. Straker's balance sheet remained strong with cash of $13.07m and zero debt.

Grant Straker, CEO and Co-founder of the firm, said, "We are pleased to be seeing some evidence of general stability in the marketplace, which has allowed us to report a quarter of sequential growth. Our gross margin result was a standout for me this quarter. These two factors have again seen us deliver positive Operating Cash Flow and Free Cash Flow as well as a record Adjusted EBITDA profit. Our continued financial strength underpins our share buyback which we believe, especially at the current share price, is enormously accretive to shareholder value."