Straker’s Growth Slows as Enterprise Shift Subdues Third Quarter FY 2020 Results

On January 30, 2020, language service provider (LSP) Straker Translations announced its financial results for the three months ended December 31, 2019, which was the company’s third quarter for fiscal year 2020.

The New Zealand-headquartered, Australia-listed LSP reported using “cash inflows” and “operating net cash in/outflow” metrics — a somewhat unusual way of expressing top and bottom line figures. (Revenue and profit are more common, of course.)

Straker’s cash inflows were relatively flat at NZD 6.9m (USD 4.5m), climbing just 2% from the prior year (i.e., Q3 FY2019). Revenue contributions from On Global and COM Translations, which Straker acquired in the intervening period, were offset as organic growth was subdued by Straker’s move toward enterprise customer accounts.

This is likely explained by the fact that the project life cycle and payment terms for enterprise customers tend to be longer than for the long-tail customers Straker traditionally serviced. As a result, enterprise revenues may take longer to register in the top line.

The muted top line growth also affected Straker’s profitability, with operating net cash outflow coming in at NZD -0.3m (USD -0.19m) for the quarter. In the nine months to December 31, 2019, Straker’s operating net cash outflow was NZD -1.3m (USD -0.84), on cash inflows of NZD 20.3m (USD 13.1m).

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In the update, Straker identified several business highlights from the quarter including a sizeable deal in media localization, which remains the LSP’s fastest growing vertical. The contract, which will be completed in March 2020, will see Straker provide media localization services to a US-based TV production studio through its new office in Burbank, Hollywood.

As part of the contract, which is estimated to be worth “close to seven figures”, Straker will work with technology partner AppTek to apply AI and machine learning tools to subtitling and dubbing. US-based AppTek provides machine translation (MT) and automatic speech recognition (ASR) to media entertainment customers and call centers.

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Another key development, Straker said, was the integration of On Global onto Straker’s RAY translation management platform, which took six months to complete from the date of acquisition in June 2019. As Straker continues to execute its strategy of acquiring boutique LSPs, the company’s goal is to leverage its proprietary technology stack to increase profits from acquired client revenues.

Straker also highlighted a healthy acquisition pipeline and a cash balance of around USD 8m (most of it left over from the IPO). The company said it is working on a number of potential acquisitions and is “in the advanced stages of an M&A opportunity that is expected to be signed by the end of March [2020].”

Aside from spending on acquisitions, Straker also invested in R&D and sales, adding two employees to each of these teams in the third quarter.

On the same day Straker announced financial results, shares in the company fell marginally to AUD 1.34. By market close on February 3, 2020, the share price sank further to AUD 1.25m, falling below the IPO price of AUD 1.71. The company’s current market capitalization stands at around USD 44m.