In an ASX announcement to the market on Tuesday, Sydney-based AI annotation and services company Appen, listed under the ticker APX, said it had finally turned a corner and was on track to return to underlying profitability in the September quarter after a trying year marked by losing one of its biggest contracts with Google. After having some decent news to speak of, though, the firm is now rolling out a $50 million capital raise as it looks to take advantage of some market growths in generative AI.
Appen’s share price has bounced back very nicely, trading at above $2- quite a strong recovery from a low of $0.26 in January-and its market capitalization is now just short of half a billion dollars. To cash in on this momentum, Appen would issue 26 million new shares equivalent to 11.6% of the existing share capital at $1.92 a share. Although this translates to an 11.5% discount compared to the last closing price, it still reflects a 58% raise from the end of August when the company revealed that it has streamlined its bottom line through cutting losses to $25.5 million in the first half of the fiscal year.
The underwritten institutional placement is expected to bolster Appen’s cash reserves to approximately US$62.4 million ($92.5 million). There will then be a $5 million share purchase plan (SPP), offered at the same share price.
The terminated Google contract worth more than $125 million a year resulted in the change of leadership, and the current CEO is Ryan Kolln, succeeding the previous chief executive Armughan Ahmad, who stepped down. The aggressive cost-cutting measures that the company has introduced in Kolln’s tenure have significantly improved the bottom line of the business.
Gross margin improved by 7.6 percentage points to 41.2% in the quarter, while underlying EBITDA exceeded $1 million, significantly improved from a loss of $7.5 million in the comparable period last year. Revenue declined 12.9% year-over-year to $54.1 million for the third quarter.
Profitability remains a strong emphasis, and “very positive trends for the external environment,” especially with regards to GenAI opportunities, according to Kolln. He cited ongoing growth with regard to large language models and strong revenue prospects in China, as well as within the Enterprise and Government divisions. Started in 1996, Appen develops state-of-the-art solutions in artificial intelligence using a global network of skilled contractors to provide the critical data labeling services that enable AI advancements.
