STRAKER LIMITED — Interim / Quarterly Report 2020

Nov 21, 2019

Contact

H1 FY20 Results

22nd November 2019

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~~David Sowerby (Chief Revenue Ofcer) and~~ Amaya Montoya (co-founder of On-Global) on a visit to an industrial customer in the Basque region of Spain

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Building the future of global communication using machines and humans together

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Scaling our platform to $100m revenue

Enterprise customer growth and further acquisitions, will support STG’s pathway to $100m revenue within the next 3 years

Proprietary RAY Ai platform provides STG with a unique competitive advantage in the $50bn global translation market

Over the past 3 years we have acquired and successfully integrated 6 businesses onto our platform

STG now supports 47 Enterprise customers and 2,348 business customers, including some of the world’s leading companies and brands

Substantial opportunity now exists to leverage our scalable platform and position within the Enterprise market to expedite our long term growth via a focus on aggressively growing Enterprise customers within a globally fragmented translation industry

We have commenced this growth strategy in H1 FY20, and expect to see the benefits start to flow from H2 FY20

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Data assets on the RAY Ai platform
1000
750
500
250
0
2011 2013 2015 2017 2019
Billions
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Data drives machine learning and in H1 FY20 we more than doubled our data assets to more than 1,000 billion by importing large memory assets from acquired companies

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H1 FY20 progress towards long term growth strategy Acquired On-Global to further penetrate attractive Spanish and European translation markets Entered into partnership with AppTek to provide a unique solution at scale for Media sector localisation, the fastest growing segment of the global translation industry Increasingly using our data-driven approach to win new Enterprise customers, especially around the market segment needing translation data within AI engines Business customers up 46% to 2,359, data points double to more than 1,000 billion Moving closer to positive operating cashflows

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Strong balance sheet supports Straker’s growth Straker Media localisation team at MIPcon Cannes, France

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Strategic growth plan underpins financial performance
13.3% $13.6m
H1FY20 Revenue
YoY Revenue
Growth
92%
($0.2m)
Revenue
Adjusted from Repeat
EBITDA customers
28%
$14.0m
Repeat Revenue
Growth Cash at Bank
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H1 FY20 revenue up 13.3% to $13.6m

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Revenue growth in H1 FY20 reflects shift in focus to Enterprise customers to expedite long term growth

▪

Revenue was up 13.3% reflecting:

▪

• [Growth in core repeat business and increase in Media revenues]

• [Addition of acquired revenues from COM (Media) and On-Global]

• [Intentionally reduced revenue form “small” personal customers given sales ] & customer service focus on Enterprise customers

• [Reduced revenue from Deutsche Bank following the global downsizing of ] its Investment Banking division

• [Delays in closing larger enterprise pipeline expected in H2 ]

▪ Revenue from repeat customers increases to 92%

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Financial performance reflects growth profile

H1-FY20 Performance

▪ Revenue grows to $13.6m

• Gross margin 54%, which includes the lower margin Media business. The Translation business running at 55% consistent with prior year

• Costs up by 17%, largely due to acquired contributions and $0.4m of additional listing costs, off-set by $0.26m operational benefits from the new IFRS-16 lease standard

• ▪ Adjusted EBITDA loss of ($0.24m) down on H1-19

• ▪ Adjusted EBIT loss of ($0.84m), which includes additional depreciation from the right of use asset related to leases

	Stat H1-FY20	Pre IFRS16	Stat H1 FY19	Stat ^ v H1 FY19
Revenue	13.59	13.59	11.99	13.3%
Gross Margin Gross Margin %	7.39 54%	7.39 54%	6.63 55%	11.5% -0.9%
Operating Costs	(7.66)	(7.92)	(6.54)	17.1%
Other Income / Costs	0.03	0.03	0.02	40.7%
Adjusted EBITDA Adjusted EBITDA Margin %	(0.24) -1.8%	(0.50) -3.7%	0.11 0.9%	-329.2% -2.7%
D&A	(0.59)	(0.34)	(0.21)	181.9%
Adjusted EBIT	(0.84)	(0.84)	(0.10)	-704.3%
Adjusted EBIT Margin %	-6.2%	-6.2%	-0.9%	-5.3%

	Stat	Pre IFRS16	Stat
	H1-FY20		H1 FY19
Revenue grow th	13%	13%	39%
Gross margin % (Translation) Selling & distribution spend as % of revenue	55% 34%	55% 34%	55% 34%
General & administration spend as % of revenue	23%	25%	21%
Adjusted EBITDA margin % Days sales outstanding	-1.8% 67	-3.7% 67	0.9% 75
Revenue from repeat customers %	92%	92%	81%

Notes:

1. Earnings adjusted for non recurring costs and amortisation on acquired intangibles.

Includes On Global for four months in H1-FY20

• H1 FY20 includes the effect of the new lease standard IFRS16 where by $0.26m of lease costs shift from operating costs to depreciation and finance costs. H1 FY19 comparatives do not include this change.

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• Jobs running on the RAY Ai Platform yield a higher margin

• Platform revenues make up 84% at a 55.5% margin and have grown by 19% half on half

Platform Revenue

H1 FY20 H1 FY19 NZD m Revenue Margin % On Platform % On Platform Platform Translation 11.4 55.5% 84% 80% Non Platform 2.2 48.7% 16% 20% Total revenue 13.6 54.4% 100% 100%

Non Platform includes Media, Interpretation and acquired business not yet migrated to the Ray Platform

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• Underlying Operating Cashflow Stable HoH

H1-FY20 Cashflow

▪ Operating cash outflow ($1.0m) which includes restructuring costs. Underlying operating cash stable at ($0.98m)

▪ Straker continues to invest in the Ray platform, with 15% of total costs R&D related ($1.1m), and of this $0.6m is capitalized

▪ Key Development initiatives include new Media workbench, Translations workbench upgrade and the USA secure cluster

	Stat	Pre IFRS16	Stat	Stat ^
	H1-FY20		H1 FY19	v H1 FY19
Adjusted EBITDA	(0.24)	(0.50)	0.11	-329.2%
Non-operating expenses Changes in working capital	(0.30) (0.46)	(0.30) (0.46)	(0.06) (1.00)
Operating cash flow	(0.99)	(1.26)	(0.96)	-4.0%
Payments for capitalised software development Payments for plant & equipment	(0.57) (0.13)	(0.57) (0.13)	(0.36) (0.05)
Free cash flow	(1.69)	(1.96)	(1.37)	-23.6%
Payments for acquisitions of subsidiaries	(1.748)	(1.748)	(2.42)
Investing Cash Flow	(1.75)	(1.75)	(2.42)	27.7%
Net Proceeds from issue of shares	0.038	0.038	-
IPO Costs	(0.16)	(0.16)	(0.46)
Lease Liability Payments	(0.27)
Payment of deferred consideration	(0.64)	(0.64)	(0.03)
Financing Cash flow	(1.03)	(0.76)	(0.49)	-111.4%
Net cash flow	(4.47)	(4.47)	(4.27)	-4.6%

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Strong balance sheet

• Working capital improvements through tighter receivables management

• Days of Sales Outstanding improving to 67 days on the back of strong cash collections, which were 98% of revenues

• No external debt other than conditional earnout liabilities related to acquired business’ achieving revenue targets

• ▪ Closed with $14.0m in bank and continue to be in strong position to fund growth strategy

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Financial Summary

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Continued revenue growth with revenue from repeat customers up to 92% Gross margins stable, above industry norm Investing for growth to achieve future growth strategy Stable cash flows Improved working capital Strong balance sheet to execute growth strategy

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Ready to rapidly scale Straker’s European e-commerce localisation team presenting at a Magento conference in Germany

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5 strategic growth areas

Geographical

Grow geographical footprint while focusing on key markets

Connected Platforms

Grow by leveraging scalability of our proprietary RAY platform

Enterprise

Grow enterprise customer base to rapidly scale platform and geographic footprint

Media Grow in the fastest growing segment of the global translation industry

Grow by building capabilities and presence in key countries and market segments Acquisitions

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Enterprise Growth

• -wide, easier, faster and more cost effective methods of translation leveraging A.I , our RAY Ai platform is highly appealing

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Investment in marketing to raise
awareness of RAY Ai as a total
solution in the translation
industry to Enterprise customers
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2,359
14
3
6
2 1,605
Global programs to up-skill The number of Business
our Enterprise sales teams customer using our RAY Ai
so we can grow using platform has increased 46%
internal resources since our IPO
Enterprise Sales people in each region
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Media localisation is the fastest growing segment of the industry and most vendors have capacity constraints as content volumes expand. We have an aim to be the global leader in media localisation through our innovation initiatives

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into the RAY media platform to lead the industry in media localisation innovation

We have partnered with appTek to fill technology gaps in the supply chain to automate production processes for scalability

Increased our Media sales team and setup an office in the heart of Hollywood

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Acquisitions We continue to have multiple advanced conversations with sellers in our core target markets for acquisition.

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3
1
4
1
Regions where we are at a
negotiation stage with
potential sellers
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Number of advanced negotiations in region

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Market dynamics make M&A attractive. Ageing owners and technology disruption key drivers for change

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Integration of acquired entities going to plan, 65% of all tasks completed

*due to the nature of some projects it is not possible to move all projects to RAY

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Connected Platforms / API Connected revenue is sticky and there is significant growth opportunities as we embed ourselves inside platform communities.

19% Platform Revenue Growth Strong half on half growth in platform customers

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Our three main connected platforms are growing

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We have 4 new enterprise customers now connected on our latest AEM connector

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Key priorities for H2 FY20

Tirs Abril, European IT Support based in Barcelona, supports a human tower (3rd from top on left hand tower)

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Key priorities for H2 FY20 Undertake at least 1 acquisition Increase Media segment annualised run-rate revenues Increase RAY implementations with Enterprise customers Increase number of platform connected customers R&D investment in media platform, appTek integration and platform connectors Sales enablement program roll out for enterprise global growth sales teams

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Appendix

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Statutory Financials

Reconciliation to IFRS Income Statement FY-19

• EBITDA loss of ($1.0m) includes acquisition costs and restructuring costs

• EBIT loss of ($2.04m) down -158% on prior year due to above plus increased D&A costs

• Net loss before tax of ($0.26m) after gaining $1.3m on FX gains and earnout liability write- off of $0.5m

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Notes:

1. Includes amortisation on Com translations customer relationship assets

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What is the opportunity with STG?

Huge Market 1 2 Opportunity 70 66B ~~56B~~ 52.5 47B 43B 40B 35 17.5 0B 0 2016 2018 2021

Industry Leading 3 Technology Market leading technology developed over 10 years Data-driven approach enabling use of A.I and automation Industry leading gross margins

Proven Growth Strategy Global channels to market established Offices in 10 countries Multiple growth strategies Organic and Acquisition growth

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Market Opportunity

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Localisation enables trillions of dollars of global commerce Fragmented industry with 20,000 vendors ripe for consolidation Limitless horizon for growth

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Media content segment growing exponentially

Data will drive success as machines need data for context

10 year head start building technology to disrupt the industry

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What makes us unique in a US $50bn Industry

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We use data to drive substantial benefits for our customers in ways the traditional translation providers cannot We can do this as we have a unique platform built over 10 years that provides the competitive advantage of using professional humans and machines together in a highly efficient way

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The benefits to customers and Straker from our platform 1 2 3 Translators go Production process at scale significantly faster Efficiencies

We simplify a complex process at scale data service API automation connectors Enterprise localisation management

project managers handle more revenue per person less staff variable cost base with world leading crowd sourcing platform

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takes less time costs less to provide the service

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Successfully acquiring and integrating strategic acquisitions

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EULE
MSS
Enterprise customer
Enterprise customer
access with larger
access with larger
footprint into Europes
footprint in Spanish
largest market.
market
Kiel
Barcelona
COM
$2m
Key entry into the fast-
growing audio visual
market for localisation.
Total annual revenue
2016
of acquired
Madrid
companies at the
Eurotext
time of acquisition
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$6.4m
$4.8m
$4.6m
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2016 2017 2018 2019
Eurotext Elanex MSS COM
On Global
EULE
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Board of Directors

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Phil Norman

Independent Non-Executive Chairman

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Grant Straker

Founder and Managing Director

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Tim Williams

Independent Non-Executive Director

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Katrina Johnson Independent Non-Executive Director

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Steve Donovan Non-Executive Director

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Paul Wilson Non-Executive Director

Executive Team

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Grant Straker Founder and Managing Director

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David Sowerby

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Haydn Marks

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Indy Nagpal

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Merryn Straker Kim Andrews Chief Operating Officer Chief People Officer

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DISCLOSURE STATEMENT

• This presentation is given on behalf of Straker Translations Limited ASX:STG (Company number NZ: 1008867 / AU: ARBN 628 707 399) Information in this presentation:

• purchase, or recommendation of securities in Straker Translations Limited (Straker)

All information in this presentation is current at 22 November 2019, unless otherwise stated.

All currency amounts are in NZ dollars, unless otherwise stated.

• Should be read in conjunction with, and is subject to, Straker’s latest and prior interim and annual reports, including Straker’s Appendix 4E Preliminary Final Report for the period ended 31 March 2019, and Straker’s market releases on the ASX

• Includes forward-looking statements about Straker and the environment in which Straker operates, which are subject to uncertainties and contingencies outside of Straker’s control - Straker’s actual results or performance may differ materially from these statements

• Includes statements relating to past performance, which should not be regarded as a reliable indicator of future performance

• May contain information from third parties believed to be reliable; however, no representations or warranties are made as to the accuracy or completeness of such information, and

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Questions

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www.strakertranslations.com CEO: grant@strakergroup.com Chairman: phil.norman@strakergroup.com Investor Relations: ronn.bechler@marketeye.com.au

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