A Look at the Growth Factors for This Tech Honcho – Appen Limited

  • Nov 07, 2019 AEDT
  • Team Kalkine
A Look at the Growth Factors for This Tech Honcho – Appen Limited

Appen Limited (ASX: APX) is a global leader in the development of superior, human annotated datasets for machine learning (ML) and artificial intelligence (AI). The company has skill in 180+ languages, with more 1 million competent contractors plus the most advanced AI-assisted data annotation platform in the industry. Through its solutions, the company caters to leaders across the globe in technology, automotive, financial services, retail, manufacturing, and governments with quality, security, and speed.

The company is focused on delivering superior, human annotated data required to fuel machine learning as well as Artificial Intelligence. Thus, the core business of the company centres around the development of superior, human annotated datasets. Now, the question arises as to what human annotated dataset is.

In simpler terms, Data annotation is a process of labelling data to make it usable for machine learning. These data could be of any type which a human can easily grasp. Data could be in the form of images, text, audio, video, 3D model, tabular data etc.

In machine learning, there is a requirement of a huge amount of data for the purpose of training, validation, and testing. The machine learning model tries to find the structure of the data which is being fed into it. This data is known as the training data through which one can leverage the speed of the machine for the creation of intelligent machines. Thus, in order to make an intelligent machine, it is important to have the right data which is structured in the correct format with all the variables which are required to achieve the result.

Appen Limited, being an industry leader in this field has the expertise as well as resources which can help in scaling data annotation for variety of data types such as text, audio, speech, image, and video with more than 180 languages and dialects. Its linguistic annotation services assist in enhancing solutions like natural language processing, speech recognition, as well as site search relevance.

A client getting engaged with APX would gain access to its trained team of linguists as well as project managers around the world. These experts help users teach machine learning programs in order to have a better awareness of the text, imitate human thought, and reply more precisely to human communication.

Appen’s USP

Appen is known for executing high-quality, secure projects along with agile project delivery. High-quality data annotation coupled with categorisation is at the top of the priority list of the company.

The company has immense experience across a wide range of text types. Let’s look at those.

Appen’s USP

Appen’s Industry Presence:

Appen has more than 20 years of experience working across various industries. It learns about industry specific applications of AI and ML that rely on high-quality, human-annotated datasets. Below is the list of industries in which Appen has its presence.

  • Automotive
  • Financial Services
  • Government
  • Healthcare
  • Retail
  • Technology
1H FY2019 Results:
  • Revenue during the period increased by 60 percent to $245.1 million.
  • Underlying EBITDA grew by 81 percent to $46.3 million and statutory EBITDA improved by 48 percent.
  • Underlying EBITDA margins soared up from 16.8 percent to 18.9 percent.
  • Underlying NPAT went up by 67 percent to $29.6 million and statutory NPAT by 33 percent to $18.6 million.
  • 85 percent of the revenue during the period was through the organic growth of the company.
  • Relevance revenue rose by 48 percent to $193.7 million.
  • Leapforce got integrated completely.
  • The speech and image data increased by 85 percent.
  • Figure Eight, acquired by the company in April 2019, is delivering on its strategic rationale
  • APX announced an interim dividend of 4 cents per share.
Growth Factors:

Appen, which is into the business of developing superior, human annotated datasets for machine learning and artificial intelligence, has a huge scope for growth in the future. There is always a need for quality training data in the high-growth AI market. As per the estimate of Gartner, which is the world's leading research and advisory company, AI projects in the average organisation is growing at 106 percent annually.

The company’s constant investment in technology uniquely places it to meet the market’s demand for huge volumes of quality data at speed across multiple data types for an increasing number of end-use cases.

As per the prior Annual reports of the company, the principle activities of the company have included the provision of data solutions and services for global technology companies and government agencies which has supported the company’s revenue and earnings growth.

Outlook:

The company is strengthening its position in a high growth market by making investments in technology, sales and marketing, government and in China. The company expects its full year underlying EBITDA, including Figure Eight, is trending to the upper end of $85 million to $90 million.

Scope of Growth:

As highlighted in Appen’s outlook, the company is investing in China. Let us know about the AI market in China.

The AI market in China is huge. As per China’s AI Development Report 2018, a study which was undertaken by Tsinghua University, the market value of AI in 2017 reached US$3.5 billion, equivalent to 23.7 billion yuan. In 2018, the total global AI investments in China was 60 percent. The funding came from global venture capital firms and private equity, tech giants creating their own AI tools along with the Chinese government. By 2030, China’s plans for AI are expected to aggregate to ~ US$146 billion as per the world economic forum. According to the McKinsey Global Institute, AI would provide the Chinese economy with a productivity boost in the short term.

Companies in China across various sectors use Artificial Intelligence for detecting patterns, derive a conclusion from large datasets and unveil new efficiencies. Apart from this, the education system in China also includes AI in the curriculum to prepare children for this new game-changing technology.

China, being the leading global centre for AI innovation, remains an exciting market for the developing technologies. Making AI investment and deployment of solutions in China show a trend of ascendancy.

Appen Limited in China works with a range of organisations and helps them to improve their AI and machine learning solutions via its high-quality, human-annotated training data.

Stock Performance:

The stock of APX has given a YTD return of 55.94 percent. On 7 November 2019, the stock closed at $19.990, up 0.15 percent from its previous closing price. APX has a market cap of $2.41 billion with approximately 120.98 million outstanding shares, PE ratio of 47.260x and an annual dividend of 0.4 percent.


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