“We are in exciting times in Artificial Intelligence and Appen continues to play an important role in our industry. Our data and services power the world’s leading AI models and we are seeing growing demand in generative AI,” Chief Executive Officer and President at Appen Armughan Ahmad told an investor briefing this afternoon.
Appen provides and improves data used for the development of machine learning and artificial intelligence (AI) products. Although this seems to be in high demand, while the world is exploring and taking a deeper dive into machine learning, it doesn’t seem to be propelling Appen’s financial status just yet.
The tech company released its half-year results for 2023, but Ahmad seemed concerned about what he called “far from satisfying” results. “They reflect the ongoing global macroeconomic pressures and continued slowdown in tech spending particularly amongst our largest customers,” Ahmad said.
Appen is determined to “remain laser-focused” on resetting the business. “This includes instilling operational rigor across the business, releasing new generative AI focus products, refreshing our go-to-market and sales capabilities, establishing meaningful ecosystem partnerships, and continuing with our AI for good focus.”
Revenue declined by 24%
Appen’s total revenue decreased by a whopping 24% to $138.9 million.
Deputy CFO Justin Miles has attributed this to a lower contribution from their global customers, reflecting lower volumes as the customers optimize their spending and reduce costs in response to the challenging external environment.
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This also impacts the new markets business where the company noticed a decline in global product revenue. “Excluding global product revenue, the new markets business recorded a 5% revenue reduction on the prior corresponding period,” said Miles.
The underlying EBITDA (before FX) showed a loss of $15.7 million which reflects a lower gross margin and a proportionally higher cost base versus the 2022 financial year.
“Most of this decline can be attributed to global services as well as the impact of global products. global services revenue declined 27% impacted by reduced volumes as customers looked to optimize and reduce costs,” said Miles.
Turnaround strategy showing “early green shoots”
“We are seeing early green shoots in our generative AI product offerings. However, the revenue growth does not offset the declines we are experiencing in the remainder of the business,” said Ahmad. “We believe that our good market strategy along with our strong AI capabilities and market momentum related to generative AI will enable Appen to return to growth.”
Appen is not sitting on its hands. With the turnaround strategy in place, it is continuing to evolve the business model to improve the quality and predictability of their revenue. “Today, the majority of our revenue is services based as reflected in our global services revenue. We also have a renewed focus on our tech-enabled services business,” explained Ahmad.
The CEO is confident that the progress made to turn around the business will enable them to capture value from the growing generative AI market and return Appen to growth.
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