In FY24, AI-driven language and content services provider Straker (ASX: STG) faced market conditions tougher than initially expected, with lower revenue growth and subdued M&A activity. Investors did not look kindly upon this underperformance, with Straker shares falling about 37% in FY24.
During the period, Straker diversified its services to include a generative AI-based product called AI Verify and a new version of its language cloud offering, AI Cloud. To represent this expanded business, it changed its name to just “Straker”, dropping the “Translations”.
In FY24, Straker reported a revenue of $46.18 million, down 15.8% on FY23. This marked the Company’s third consecutive year of positive and improved YOY adjusted EBITDA. The EBITDA of $4.16 million was triple the $1.29 million delivered in the prior corresponding period (pcp).
Co-Founder and Chief Executive Officer, Grant Straker, said, “As a management team, we are immensely proud of the step change in the profitability of Straker, as demonstrated by this set of results. We dramatically expanded margins, continued to be EBITDA positive, generated cash, bought back 5% of the Company and maintained enviable balance sheet strength.”
He added, “On the Revenue side, however, there was no escaping the fact that conditions were tougher than expected, particularly as clients moderated the tempo of their commercial engagement with technology suppliers as they assessed the implications of generative AI, among other factors.
“We embrace generative AI wholeheartedly and leveraging this technology has been a core element of our product development strategy to support future top-line growth, exemplified by the recent launch of our Verify product. Early indications from customers regarding AI Verify are extremely encouraging.”
In Q2 FY24, Straker launched the Managed Services (MS) division for localisation management, with IBM as the key customer. The MS division provides translation request management and localisation infrastructure services.
During the year, it completed the development of its new Compliance/Verification product leveraging generative AI. It was launched before year-end as ‘AI Verify’. The Verification component will allow customers to run checks on their content, including for factual accuracy. The Compliance offering is designed to reduce internal and external costs for audit and compliance teams.
Plus, after a soft launch in Q2, version 2.0 of the enterprise-grade Language Cloud platform was released just before year-end and continues to build on the base of the Slack and Microsoft Teams platforms. It has been rebranded as ‘AI Cloud’, and its use cases have been broadened beyond just supporting translation workflows to cover instant translation directly inside customers’ workplace apps.
Pointing to its region-wise performance, Europe demonstrated the best relative performance, even with a softer final quarter. North America was also reasonably stable, but after a solid performance for most of the year, Lingotek, a Straker subsidiary, experienced a softer final quarter as companies constrained their spending.
Overall, Straker’s Free Cash Flow (FCF) stood at $2.3m, a $3.2m improvement versus the PCP. It ended the year with no debt and cash of $12.2m.
In FY25, Straker expects gross margin to be above FY24 levels, continued positive EBITDA and FCF generation, and its new AI app product suite, ‘AI Cloud’, contributing to its revenue base.
Alinda is a Business Reporter for The Sentiment
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