Ord Minnett upgrades Straker as FY25 result beats expectations

Straker has earned a sharp upgrade from Ord Minnett after delivering a stronger-than-expected FY25 result

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• Ord Minnett has upgraded Straker’s price target to 52c

• Straker delivered record adjusted EBITDA of $4.8 million in FY25

• The company has accelerated its shift to AI-powered, recurring revenue streams

Special Report: Ord Minnett has lifted its 12-month price target for Straker by 42% to 52 cents per share following a better-than-expected FY25 result that saw the AI translation tech company deliver record margins and its strongest ever adjusted EBITDA.

Maintaining a hold rating, the broker acknowledged Straker (ASX:STG) strong execution in pivoting away from traditional language services and into AI-led, margin-rich offerings such as SwiftBridge and AI Verify. The result, Ord Minnett noted, came in ahead of expectations across nearly every key metric.

Revenue of $44.9 million landed at the top end of guidance and slightly ahead of the broker’s forecast, while gross margins surged to 67%, well above the expected 63.8%. Adjusted EBITDA of $4.8 million – the highest in the company’s history – came in 141% above expectations.

“The FY25 result exceeded our forecasts on revenue, margins and profitability,” the broker said in a note to clients. “Execution risks remain, particularly with the upcoming expiry of the IBM contract, but the early traction from Straker’s AI offerings positions the company well heading into FY26.

FY25 marked a turning point for Straker as it pushed deeper into AI-powered SaaS and enterprise translation tools. While overall revenue was down year-on-year due to a $9.6 million drop in legacy Language Services, that shortfall was partially offset by a $4.7 million gain in Managed Services, which more than doubled.

Recurring revenue also strengthened, with subscriptions holding firm and a notable debut from AI Verify, which generated $1.1 million in its first year. The launch of SwiftBridge AI in Japan – developed with IBM and now being sold in partnership with IGUAZU Corporation to meet new Tokyo Stock Exchange regulations is expected to add further upside to Straker’s emerging SaaS business.

Legacy services now account for just 68% of revenue, down from 81% the year prior, with the company forecasting that trend to continue as high-margin offerings scale.

Straker ended the year with $12.9 million in cash and no debt, equivalent to 20c per share. Cost control was a major theme, with operating expenses down 17% and headcount reduced by 15%, including a 32% reduction in the production department.

Ord Minnett has lifted its revenue, margin, and EBITDA forecasts through FY28. The broker now expects adjusted EBITDA to more than double between FY26 and FY28, citing improved margin assumptions and fixed-cost leverage.

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.