Why the Straker Translations (ASX:STG) share price is rocketing today

Straker Translations now expects revenue to exceed $50 million in FY22, sending the share price higher today.

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The Straker Translations Ltd (ASX: STG) share price is putting a smile on the faces of shareholders today. Shares are surging off the back of the language services company's outlook update.

At the time of writing, the Straker Translations' shares are up 10.83% to $2.00.

A 'transformational' year

Investors are scrambling to get a hold of Straker Translations shares this morning following the company's update. In the release, the company points to a strong outlook for the 2022 financial year. This is thanks to its leadership in the consolidating global language services sector.

Straker also touched on its performance highlights for FY21, these included:

  • Revenue increase of 13% to $31.3 million for year ending March 2021
  • On a proforma basis, unaudited revenue tops $41 million for FY21
  • Lingotek acquisition delivers $1.9 million in revenue within two months of integration.
  • Net losses after tax increase to $6 million from $2.5 million.

These results were previously published in April. However, now they are audited and official.

The big-ticket item for Straker is its appointment as strategic translations provider to IBM (NYSE: IBM).

Additionally, the acquisition of US-based Lingotek has also been described as 'transformational' for the company. The deal has added $11 million in annual incremental revenue for Straker.

Positive outlook lifts Straker Translations share price

Notably, Straker advised it forecasts revenue for 2022 financial year to exceed $50 million with an improved gross margin.

The company reasons there is a growing recognition among enterprise customers of Straker's global reach and the benefits of its RAY translation platform. Furthermore, the inclusion of Lingotek pushes the company's proforma revenue to $41.2 million – representing a 48% increase on the prior year.

Commenting on the update, Chief Executive and Co-Founder Grant Straker said:

Our strategic priorities are clear. We are focused on driving consolidation in the translation sector, building repeating revenues – particularly among the large global enterprises that benefit from Straker's global reach and our Ai-Powered RAY translation platform – and continuing to consolidate our technological leadership.

While the company suffered challenges from COVID-19, it believes it is also creating opportunities. Considering the deferral or cancellation of work has weighed more so on smaller translation companies, this has put more pressure on the consolidation of the industry.

Motley Fool contributor Mitchell Lawler has no position in any of the stocks mentioned. The Motley Fool Australia has recommended Straker Translations. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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