Data centres

Appen (ASX: APX) Reports FY24 Results: A Year of Transformation and Growth

Appen Limited has wrapped up a transformative 2024, bouncing back from challenges to return to revenue growth in the second half of the year. With a strong focus on cost control and capitalizing on generative AI, the company hit its goal of achieving cash EBITDA profitability early in H2 2024.

Key Highlights

  • Revenue: $234.3 million, down 14.2% due to the termination of the Google contract. However, adjusted operating revenue (excluding Google) grew 16% to $220.9 million, driven by generative AI projects.
  • New Markets Boom: Revenue surged 42.6% to $116.2 million, led by a 71% jump in China and a massive 222% growth in Global Product.
  • Profitability on the Rise: Underlying EBITDA (before FX) improved by $23.9 million to $3.5 million, thanks to cost-cutting measures and a rebound in revenue.
  • Net Loss Narrowing: Underlying net loss after tax reduced to $10.5 million, a $42.3 million improvement.
  • Cash Position: Strong at $54.8 million as of year-end.

CEO’s Take

Appen’s CEO, Ryan Kolln, sees 2024 as a pivotal year, stating, “We reacted swiftly to the Google termination, executed cost reductions, returned to revenue growth, and hit our cash EBITDA target ahead of schedule.” He credits the company’s success to its focus on generative AI, which is revolutionizing the industry.

While China and Global Product divisions have flourished, Appen acknowledges that Enterprise & Government divisions have yet to gain momentum. The company remains cautious with investments in these areas, ensuring they align with market opportunities.

Revenue Breakdown

  • Global Services: Revenue fell 38.3% to $118.1 million due to the loss of the Google contract. Excluding Google, the decline was just 3.9%.
  • New Markets: The standout performer, up 42.6% to $116.2 million.
    • Global Product: Skyrocketed 222% to $31.3 million.
    • China: Expanded 71% to $58.9 million, fueled by generative AI projects.
    • Enterprise & Government: Dropped 30.2% to $26 million due to lower volumes and uncertain generative AI spending.

Cost Cuts and Financial Health

Appen’s $13.5 million cost reduction program was executed in H1 FY24, helping drive profitability improvements. Operating expenses fell 26.1%, supporting the company’s turnaround.

Looking ahead, Appen is laser-focused on maximising profitability, leveraging its generative AI expertise, and expanding in high-growth markets like China and Global Product. While challenges remain, the company is well-positioned to build on its FY24 progress in the year ahead.