The Straker Translations Ltd (ASX: STG) share price is down 6.73% in late afternoon trading.
It appears ASX shares investors are not impressed with the company's June quarterly activities report released today. It reported "strong and profitable Q1 FY23 revenue growth" but significant cash outflows.
Straker shares opened at $1.03, well down on their previous closing price of $1.115. They slid to a 52-week low of 96 cents before recovering to $1.04 at the time of writing.
By comparison, the S&P/ASX All Ordinaries Index (ASX: XAO) is well into the green today, up 1.09%.
Straker Translations share price dips despite 66% revenue growth
Straker Translations provides language services and technology via subscriptions to its customers.
Here are the key takeaways from its quarterly report:
- Q1 FY23 revenue of NZD$18.8 million, up 66% on Q1 FY22 and 8% on Q4 FY22
- Adjusted EBITDA of NZD$1.5 million (third consecutive quarter of growth)
- Operating cash outflow of NZD$2.3 million due to an increase in working capital and the timing of customer receipts. Straker expects a return to positive operating cash flow in Q2 FY23
- Total cash outflow of NZD$4.3 million, up from NZD$2.2 million in Q4 FY22 following $1.1 million in earn-out payments on IDEST Communications and NZTC and $700,000 in research and development (R&D) capitalisation
- Strong balance sheet with no debt
- NZD$11.4 million in cash, down from NZD$15.1 million in Q4 2022
- Robust sales pipeline driven by customers looking for technology-led global localisation solutions
Straker said its revenue growth was "… underpinned by growing sales to multinational organisations and the contribution from the Belgium-based translation provider IDEST Communications, acquired in Q4 FY22".
Also contributing to the revenue boost was "strong growth across the APAC and European operations (excluding IDEST) and the continuing success and expansion of Straker's strategic translations service agreement with IBM".
What else happened in FY22?
Straker says IDEST "continues to perform well and in line with expectations". The company sees an opportunity for cross-selling Straker's global language translation capabilities.
IBM translation volumes are in line with expectations and the system integration is mostly completed "with new partnership opportunities developing".
Straker said eased COVID-19 travel restrictions were enabling sales staff to once again attend industry conferences and meet face-to-face with customers.
What did management say?
Straker's CEO Grant Straker said he's pleased with the company's progress and confident it can realise its growth opportunities.
Straker commented:
We have a strong balance sheet, are well funded and are on track to deliver on the guidance issued at the end of May 2022 for profitable growth in revenue for the 12 months to the end of March 2023 of 20% and gross margins exceeding the 54% achieved in FY 2022.
This outlook is supported by the latent opportunities in recent acquisitions, including IDEST, a strong sales pipeline among global enterprise customers and governance organisations, the company's technological leadership, and the strength of its reputation as a change maker in the global translations sector.
We also believe growth will be assisted by the easing of COVID-related travel restrictions …
What's next?
In its statement, Straker said it wanted to increase its technology lead over its peers:
We are focusing part of our research and development team on a new innovation cycle aimed at
increasing our technology lead over the competition.Based on some projects with major customers, we have seen how the world of localisation is evolving and how customers are looking for eco-system providers that are integrated into customer processes.
This cycle of innovation should also open up more SaaS revenue opportunities. We expect these efforts to start contributing to revenue in the second half of the year.
Straker Translations share price snapshot
The Straker Translations share price is down 35% in the year to date. The All Ords is down 10%.
Incorporating today's losses, the micro-cap ASX share is up 1.96% over the past month.
The company has a market capitalisation of $75.59 million.
