TLDR:
Appen (ASX: APX) has made a great comeback in Q3 FY24, turning profitable with impressive growth in key areas, especially in China. They’ve also got a healthy cash balance, and their revenue is on the up, particularly thanks to the growth of AI-related projects.
A Closer Look at Revenue
Growth, Even Without Google
In Q3 FY24, Appen saw $54.1 million in revenue, which is a 13% decrease compared to the same time last year. But here’s the twist: the reason for this drop is the absence of a big contract with Google, worth $21.9 million last year. When you take Google out of the picture, Appen’s revenue actually grew by an impressive 35% compared to the previous year.
This boost is mainly driven by the company’s focus on generative AI projects. These projects are picking up traction, especially in China and with a major global client. As the demand for AI services grows, Appen is riding the wave of new opportunities, which is setting them up for a solid year.
Profitability: The Turning Point
A Big Improvement in Profit
Here’s where things get exciting: Underlying EBITDA (a measure of earnings before taxes and expenses) was $1.0 million in Q3 FY24, flipping from a $7.5 million loss this time last year. That’s an improvement of $8.5 million!
But it gets better: Appen also saw underlying cash EBITDA (a similar measure, but focusing on cash flow) at $0.04 million. This is a huge turnaround, up by $8.6 million compared to the loss in the same quarter last year.
This improvement shows that the company’s efforts to reduce costs and streamline operations are working, and now they’re in a much better position to grow profitably.
Cash: A Strong Foundation
When it comes to cash, Appen is sitting pretty. They ended Q3 FY24 with $30.3 million in cash. And after completing a $50 million institutional placement in October, their cash balance is now at a strong $62.4 million.
While the company did see a drop in cash flow from operations compared to the previous quarter, that was expected due to certain supplier payments and the normal working capital cycles. But don’t worry—overall, the cash position remains healthy and supportive of their future growth plans.
CEO’s Positive Outlook
Appen’s CEO, Ryan Kolln, is feeling optimistic about the company’s direction:
“Profitability is a key focus for Appen, and we are really pleased to have returned to profitability early in Q3 FY24. With the growth we’re seeing in AI-related projects and in markets like China, we’re excited about the future.”
Appen’s main goal right now is to continue growing in its key markets and make the most of the booming AI sector. So, expect more growth as they expand their services and solidify their position in the industry.
What’s Next for Appen?
So, what’s on the horizon for Appen? Here’s a quick breakdown of what we can expect moving forward:
- Expansion in key markets like China, where revenue is growing fast.
- Tapping into the booming AI industry, especially in areas like large language models (LLM).
- Focusing on growth in their Enterprise and Government sectors, which are key to long-term success.
Wrapping It Up:
All in all, Appen’s Q3 FY24 results show a company that’s bounced back in a big way. They’ve turned their profit around, are growing revenue at a healthy pace, and have plenty of cash in the bank to support future growth. If they can keep up the momentum, they’re in a great position for a strong finish to FY24 and beyond.
