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Appen Limited (ASX:APX) is a worldwide frontrunner engaged in evolving excellent-quality of human-annotated training datasets for machine learning and artificial intelligence.
The company has more than two decades of practice in capturing and enriching an extensive range of data types which comprises of speech, text, image, and video. With profound knowledge in over 180 languages and accessibility to international stakeholders of more than 1,000,000 trained contractors, Appen is engaged with technology, automotive and eCommerce companies along with the government around the world, to assist them in advancing, improving and utilising products that depend on natural languages and machine learning.
On 25 February 2019, the company declared a final dividend for the year ending 31 December 2018 of 4.0 cents per share, partially franked (73% franked, up 33% from 2018). The record date for determining entitlements to the dividend is 1 March 2019. The payment date is due on 25 March 2019.
Financial performance:
The Non-current assets included Goodwill of $81.1M and identifiable intangible assets of $40.2M concerning the Leapforce acquisition. The Debt repayment of $17.8M during the period, was somewhat offset by period end unrealized FX restatement loss of $6.9M. The Net debt of $18.7M resulted in a debt leverage ratio of 0.26x for last 12 months. TThe Cash flow from operations increased by 249% and remains strong. The Underlying EBITDA cash conversion was of 92%.
Business Performance:
The company delivered strong financial and business results in 2018, with growth in revenue and earnings as well as margin expansion. Content Relevance played its role as the Companyâs growth engine with year-on-year revenue growth of 148%, from $126.2M to $312.8M, made up of strong organic growth and the integration of Leapforce, acquired in late 2017.
The Language Resources team delivered a solid second half that resulted in a record annual revenue of $51.4M, up 27% on the prior year.
The integration of Leapforce was completed with roughly half the projects migrated onto the enhanced Leapforce system, now known as Appen Connect, between December 2018 and now, with the balance to be migrated by the end of April. The company had achieved ISO 27001 certification for information security for its Manila facility, increasing its attractiveness to security-aware customers and prospects. The growth in AI, fuelled by a growing range of use cases, the availability of enabling infrastructure and the need for businesses to harness its benefits to compete, had been driving the demand for high-quality training data.
Effective January 2019, APX unified its Language Resources and Content Relevance teams to provide greater customer focus and to optimize the customer experience. China remains an attractive market for the company, and it is investing judiciously to participate in this opportunity with a new office and staff in Shanghai that bring it closer to customers.
Outlook:
Appen is uniquely positioned and continues to execute strongly in a high growth market. The company is investing in engineering to meet the demand for data. The company is expecting Investments of $6M (P&L impact) funded by efficiency savings in 2019 from Leapforce integration. The Companyâs full-year underlying EBITDA for the year ending 31 December 2019 has been predicted to be in the range $85M - $90M, after engineering investment (at A$1 = US$0.74 Feb-Dec 2019).
Stock performance: Given the strong business outlook, the stock has gained strong traction among investors, as evident with the stock performance.
The stock of the company last traded at A$23.500 as on 1 March, Friday with a market capitalization of circa A$2.5 billion and 106.6 million outstanding shares. The stock of the company has consistently given a positive return of 72.39% in the last 3 months. Its YTD performance is even more impressive at 82.89% as on 28 February.
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