A presentation for Straker\u2019s August 20 annual meeting made no bones about why it is repositioning itself as an AI firm.<\/p>\n
Staker\u2019s shares surged during the pandemic tech boom that peaked in early 2022 (when its shares topped A$2). Since then, they\u2019ve been in a long decline. A table in its AGM report shows its peers have suffered a similar sharemarket fate.<\/p>\n
The LLMs (large language models) like OpenAI\u2019s ChatGPT, first released in November 2022, accelerated the rise of free language translation tools.<\/p>\n
\u201cWe know investors have seen market caps for traditional language service providers decline,\u201d Staker\u2019s AGM presentation said.<\/p>\n
\u201cStraker has been caught up in this industry-wide sentiment.\u201d<\/p>\n
Ensuring Straker is seen as an AI company has become a key goal for management, investors were told.<\/p>\n
There have been marketing tweaks. In 2021, the firm\u2019s name was changed from Straker Translations to Straker \u2013 or, often, in a nod to its new website address, Straker.AI.<\/p>\n
But Straker says the changes are more than skin deep.<\/p>\n
While many \u201cAI\u201d startups are \u201cChatGPT wrappers\u201d, selling services based on OpenAI\u2019s chatbot, Straker says his firm has a deep technical and commercial relationship with IBM. Straker is building its own AI models, and his staff are working with IBM\u2019s to jointly pursue revenue opportunities.<\/p>\n
He says the new $28m deal with Big Blue \u201cis a pretty unique thing for a New Zealand company to achieve, and it expands our relationship with IBM at a strategic level where our AI models will run inside of the Watson X infrastructure. IBM teams globally can sell our technology\u201d.<\/p>\n
\u201cIt expands our relationship beyond the translation services space and into the general AI space.<\/p>\n
\u201cGiven our long history in building machine learning models, this has naturally led us to become experts in building small language models. We would be one of the only companies in New Zealand with extensive AI model-building capability.\u201d<\/p>\n
Revenue down, more red ink<\/p>\n
On the face of things, Straker\u2019s FY2025 results look challenging \u2013 and certainly didn\u2019t get an enthusiastic reception from investors as its stock stayed in the doldrums.<\/p>\n
Revenue fell 10% from $50m to $44.8m as net profit widened from $2.2m to $10.2m and the firm shed 40 staff as it reduced its headcount to 170.<\/p>\n
But Straker says most of the red ink was non-cash impairments on previous acquisitions (which totalled $6.8m). Accounting changes to the way software is amortised.<\/p>\n
Underlying numbers stronger<\/p>\n
Straker says the global economic slump was a factor in the revenue dip, but the staff cuts were largely because of AI automation and would have happened regardless.<\/p>\n
However, he focuses on adjusted earnings before interest, tax, depreciation and amortisation (ebitda), which increased 18% to a record $4.8m.<\/p>\n
\u201cWe finished the year with $12.9m in cash [from $12.1m in FY2024] and no debt. This consistent financial strength means Straker has not had to raise equity funding to invest in new AI-driven product offerings,\u201d Straker says.<\/p>\n
He says the percentage of higher-margin revenue from AI-driven products is on the rise and could account for 60% of turnover within six months. His firm is forecasting AI will account for 70% of its revenue within 18 months.<\/p>\n
\u201cThe pivot into AI has had its moments, but the winners in this space are going to be big winners,\u201d Straker says.<\/p>\n
\u201cAnd it\u2019s great for us to be starting to build out an AI ecosystem from New Zealand that can sell to the world, rather than NZ just being consumers of AI.\u201d<\/p>\n
AI, with a touch of human checking<\/p>\n