Shares in Appen, which have been sold off after weak interim figures and downgrades, bounced back with a strong relief rally on a day when the wider market didn’t want to know very much about anything and staged its biggest selloff since February.
Appen, which is an artificial intelligence services provider, reiterated guidance yesterday ahead of a market briefing. That helped calm nerves among investors and the shares closed the day up 17% at $13.20.
The company said underlying earnings before interest, tax, depreciation and amortisation (EBITDA) guidance of between $US83 million and $US90 million excluding an undisclosed restructuring charge for the current half year that is expected to generate annualised savings of US$15m in 2022 “before reinvestment”.
The cost cuts include staff retrenchments.
The $US guidance is in line with its previous guidance of $A120 million to $A130 million (based on constant currency of a dollar at 69 US cents) and adjusted into US dollars to reflect a change in its reporting currency. It also represents growth of 18% to 28% year on year.
Appen said it will now report in US dollars, which will remove a lot of the Australian dollar translation uncertainty from its forecasts (and no doubt the results).
Around 90% of Appen’s business is in the US with 80% of its business generated from a handful of tech giants like Facebook, Google and Amazon.
Appen’s shares fell last December after a surprise downgrade triggered concerns these major clients were becoming less reliant on its services.
Appen makes most of its money in the US from crowd sourcing a global workforce that does the low-level basic work for the technology giants.
The workers teach computers to recognise basic images and speech, laying down the basic groundwork for the development of Artificial Intelligence solutions.
Yesterday’s update reported an order book of $340 million at the end of April 2021 against $240 million in mid-February results.
Appen told the briefing on Wednesday that it is restructuring its business to align to its product-led growth strategy and distinct customer propositions.
This will see the company operate with four customer-facing business units – Global, Enterprise, China, and Government.
Appen claims the changes will provide greater visibility of the drivers and performance of the business.
As well, Appen said the changes reflect its evolution from being the leading provider of AI data annotation services to a provider of a broad range of AI data annotation products and solutions that unlock growth in new markets.
