Appen (ASX:APX) shares nosedive over 27% today, here’s why

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Appen (ASX:APX) shares nosedive over 27% today, here’s why

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 Appen (ASX:APX) shares nosedive over 27% today, here’s why
Image source: © Timonschneider | Megapixl.com

Highlights:

  • Appen, in its unaudited half year results, has lowered revenue and earnings to fall 7% and 69% respectively.
  • While the company posted US$12.5 million in net profit after tax in 1HFY2021, Appen expects underlying net loss after tax to be around US$3.8 million in 1HFY2022.
  • However, in China, despite a three-month COVID lock down, Appen has grown, registering first half revenue up 141% to US$18.0 million.

Share price of artificial intelligence data services business firm, Appen Limited (ASX:APX), witnessed a steep downfall today (2 August 2022) as the company shared yet another significant earnings downgrade.

Appen’s shares were spotted trading 27.145% lower at AU$4.160 apiece at 10:48 AM AEST.

Claiming to be a global leader in data for the AI Lifecycle, Appen issued an update regarding the company’s half year results for the six months ended 30 June 2022. Appen also shared its FY2022 outlook.

Key takeaways from  unaudited first half results report:

  • Appen expects its group revenue to fall 7% to US$182.9 million. A decreased contribution from the global division because of lower digital advertising demand and expenditure by some big customers has resulted in this fall.
  • The company expects underlying EBITDA to fall 69% to US$8.5 million because of fallen revenue and investments in technology, transformation coupled with an FX loss.
  • In New Markets revenue segment, Appen expects churn around US$45 million, down 6%, hit by decreased global product.
  • Statutory net loss after tax, as per Appen, would stand around US$9.4 million against US$6.7 million in 1HFY2021.
  • The underlying net loss after tax would be around US$3.8 million against US$12.5 million of net profit after tax in 1HFY2021.
  • Appen’s cash balance stands at US$42.2 million as on 30 June 2022. The company has high cash flow conversion too.

FY2022 Outlook highlights:

  • Appen expects to achieve higher volumes in the remaining half of the year as many seasonal projects are expected to be delivered.
  • However, there is no progress in July business and the uncertainty regarding trading in near future still exists.
  • Taking the revenue spin and fixed cost operating leverage of the business into consideration, the company expects FY2022 EBITDA to impact the second half.
  • Appen stated that though some of its customers are slowing the pace of their investments, Appen’s artificial intelligence product development is likely to rise.
  • The company expects that AI training data market will grow in future.

Appen is expected to l come up with its final audited results on 25 August 2022.

Appen, in its ‘not so upbeat’ announcement stated that the enterprise business is showcasing growing momentum. Though the company’s first half was not up to its potential, the second half has started well with orders of US$9.3 million in July. Also, Appen has seen solid free cash flow generation and cash conversion from EBITDA increase from 101% to 211% in the half.  

Appen’s share price performance on ASX

In last five trading days, Appen has shed off more than 26% on ASX. In last six months, it has lost over 57% and in one year, has gone down more than 64%. On year-to-date basis, the shares have witnessed a fall of almost 62%.

Appen has a vivid 52-week range of AU$4.040 – AU$13.900 as per ASX charts.

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