Appen’s Strategy Re-Fresh To drive Underlying Profit Growth From FY24

Strategy Re-fresh to Drive Underlying Profit from FY24

Appen works with a global crowd of more than 1 million skilled contractors who speak 235 languages in 70,000 locations and 170 countries. AI enables businesses to automate processes and operate more efficiently. Global spending on AI is currently estimated at $118 billion annually and is expected to reach $300 billion by 2026.

Appen has announced a strategy re-fresh and a renewed focus on discipline and operational rigour that includes $36 million in annualised cost saving measures to be achieved in FY24. This follows a continuation of the challenging operating and macro-economic conditions that the Company experienced in FY22. April Year-to-Date revenue of $95.7 million is 21 percent below the prior corresponding period, while April Year-to-Date underlying EBITDA is a loss of $12.4 million, compared to $7.9 million EBITDA for the corresponding 4 months of FY22.

The $36 million in annualised cost savings is in addition to the $10 million cost reductions announced in February this year. The $10 million cost savings will be implemented throughout the course of FY23. The $36 million cost savings will have their first full year impact in FY24. One-off costs associated with implementing the overall cost reduction program is expected to be $4 – $5 million. The cost savings have been incorporated into Appen’s strategic review and are expected to have minimal impact on the Company’s ability to generate revenue.

The Future is Generative Artificial Intelligence

Generative AI is a significant growth opportunity for Appen. Generative AI is a branch of AI that creates content such as writing samples, pictures, emails, reports, music, audio and video as well as synthetic data. Its most practical advantage is operational efficiency in that it enables businesses to interact with customers by automating specific tasks, resulting in lower labour costs. The interaction can be personalised to the needs of individual customers. Generative AI is dependent on large volumes of human feedback to create experiences that are comparable to humans and ‘make it appear real’. This is where Appen’s deep expertise in crowd-based collection, annotation and model evaluation is highly relevant for future earnings growth from Generative AI. Appen currently has multiple projects underway that relate to generative AI model development and evaluation for large tech and enterprise customers. This expansion into generative AI and related initiatives will diversify Appen’s revenue base, which excluding its largest customer, grew at approximately 10 percent over the 4-year period to FY22.

Further detail on Appen’s strategy refresh will be provided to shareholders at the Investor Technology Day on 26 May 2023, following the AGM.

Appen anticipates higher revenue in 2H FY23 relative to 1H FY23 and given the updated cost savings announced today, Appen expects to enter FY24 with positive annualised underlying EBITDA and cash EBITDA. Moreover, the Company’s disciplined and rigorous operational focus means that costs will be more dynamically managed in line with revenue opportunities and market conditions.

The improved FY24 outlook and Appen’s debt-free status, combined with the revenue opportunities around generative AI suggest that Appen has the foundation in place to capitalise on the growth opportunities of this emerging technology.