Straker’s strong free cash flow performance paves way for share buyback

Straker’s profitability further improves with record gross margins and EBITDA
Free cash flow experienced a $4 million turnaround year on year to $2.1 million.
Straker’s robust financial position has paved the way for a share buyback program of up to 3.5 million shares.

Special report: Straker (ASX:STG), a leading player in the AI language services and technology industry, has reported a rock-solid financial position in its latest results.

The only pure-play technology-driven language service provider on the ASX, Straker has laid the groundwork for a buy back of up to 5% of the company’s shares on issue.

The company showcased a strong financial performance in the first half of the fiscal year 2024, marked by a significant operating cash flow turnaround of over $4 million compared to the prior corresponding period (PCP).

Co-founder and CEO Grant Straker expressed confidence in the company’s long-term prospects despite subdued market conditions, attributing the company’s resilience to a high degree of geographical and customer diversification within the US$65 billion industry.

Straker’s focus on controlling costs and generating cash has proven successful, allowing the company to report outstanding improvements in gross margin, profitability, and cash generation.

“A standout feature of our result was a dramatic lift in gross margin for the half year to 60.8%, up 530 basis points compared to the PCP as the decline in our cost of sales outpaced the fall in revenue during the period,” he said.

“Higher margin revenue derived from increased automation and new business lines was a key contributor to the expansion of margins this half. The company continues to expect gross margin to remain materially elevated versus historical reported levels ~55%.”

Grant Straker said despite its resilience and adaptability in navigating dynamic market conditions, the company had to readjust guidance downwards to reflect the challenging economic environment.

Unlocking hidden value

Straker emphasised the significance of the share buyback as a response to the stark valuation disconnect in Straker’s share price, signaling the board’s commitment to enhancing shareholder value.

The buyback initiative, limited to 3.5 million shares (approximately 5% of the company’s issued capital), reflects a genuine commitment to rewarding loyal shareholders.

The program is set to run for a duration of up to 12 months, with the number of shares repurchased, the purchase price, and the timing subject to various factors such as prevailing share prices, market conditions, forecasted capital requirements, and unforeseen circumstances.

This article was developed in collaboration with Straker, a Stockhead advertiser at the time of publishing. 

This article does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.

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