Appen share price plunged over 20% today as the company reported its half year earnings for FY21. A year ago, APX shares were trading at an all time high of $43 a share and now, APX shares trade at $10.86 – declining by 75%. One of Australia’s top tech stocks, APX, has been hit hard during this time given the weak market dynamics in play in its sector. The AI training company has recently seen a slowdown in sales and an abundance of large corporations such as Amazon and Facebook entering the niche sector as competitors and posing a threat to the potential growth of Appen.
As APX announced their half year earnings, the APX stock price declined over 20%. Their group revenues were down, however, product revenues were up given the uptake in new AI use cases. The trigger for the sell off looks to have been the decrease in EBITDA by over 14%. Appen said that the decline was due to the fully annualised impact of FY20 growth investments and HY21 investment in new markets. Underlying EBITDA dipped by 14.3% and Statutory Profit declined by a massive 55.1% to just $6.7 million – resulting in the APX share price crashing massively. Among the highlights in the announcement were (all numbers reported in USD):
- Group revenue of $196.6M, down 2.0%, due to lower Global Services revenue as Global customers allocated resources to new, non-advertising projects in the first half of 2021
- Global Product revenue of $22.3M, up 15.2%, as Global customers invested in new AI use cases supported by Appen’s annotation platform and tools
- New Markets revenue of $47.8M, up 31.5%, driven by China, new Enterprise customer wins and product-led growth
- Acquisition of Quadrant, a global leader in mobile location and Point-of-Interest data, further extends our product offering
- China continued to grow strongly, with 1H21 revenue 5.8x 1H20 revenue
- Annual contract value (ACV) of $119.6M, up 16%
- Underlying EBITDA of $27.7M, down 14.3%, due to higher costs related to growth investments
- $66M in cash at 30 June 2021
- Interim dividend of A$ 4.5 cps, 50% franked, flat on 1H20 dividend
As far as the outlook is concerned, Appen says the planned investment in Quadrant’s product and market expansion will reduce the full year underlying EBITDA guidance provided in February and May of $83M – $90M, by $2M, to $81M – $88M. Full year underlying EBITDA is expected to be at the low end of this range due to ad-related project impacts. Year-to-date revenue plus orders in hand for delivery in FY21 is approximately $360M as at August 2021. This is 10% above the August 2020 guidance of $328M which was 79% of full year 2020 revenue.
APX shares have been in a free fall for a while now, and it looks like the pain may continue. Appen has failed to hit their guidance and underperformed during the past two earnings reports now and markets don’t seem to have confidence in APX shares.
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