Appen Limited Q2 FY24 Financial Results Highlight Positive Revenue Growth
APX (APX) Share Update July 2024 Monday 29th
Appen Limited Reports Q2 FY24 Financial Results with Positive Revenue Growth Excluding Google
Appen Limited (ASX: APX) has released its Q2 FY24 financial results, revealing significant revenue growth, particularly in the generative AI sector, despite the loss of a major account with Google.
Instant Summary:
- Q2 FY24 revenue at $55.0 million, down 16% from Q2 FY23.
- Excluding Google, revenue grew 16% from Q2 FY23.
- Significant traction in generative AI projects contributed to revenue growth.
- EBITDA improved with a profit of $0.6 million, a $7.8 million improvement from Q2 FY23.
- Cash balance remains healthy at $34.7 million as of 30 June 2024.
Financial Performance Overview
Appen Limited reported a revenue of $55.0 million for Q2 FY24, representing a 16% decrease compared to the same period last year. However, excluding the revenue from Google, the company saw a 16% increase in revenue, reaching $55.0 million compared to $47.2 million in Q2 FY23. This growth was largely driven by significant traction in multiple generative AI projects, particularly in China and with one of Appen's global customers.
Despite the loss of the Google account, Appen's revenue growth in Q2 has largely offset this loss, with June revenue reaching $21.1 million. The company's underlying EBITDA (before FX) for Q2 FY24 was a profit of $0.6 million, a significant improvement from the $7.2 million loss in Q2 FY23.
Cost Management and Profitability
Appen has executed a $13.5 million cost-out program, achieving 80% of the cost reductions by March and the remainder by the end of June FY24. The company's focus remains on returning to cash EBITDA positivity, with a target to reach this on a run-rate basis in early H2 2024. The underlying cash EBITDA (before FX) for Q2 FY24 was a loss of $2.9 million, an $8.2 million improvement from the $11.1 million loss in Q2 FY23.
Cash Flow and Balance Sheet
Appen's cash balance remains healthy at $34.7 million as of 30 June 2024. Net cash from operating activities was $2.6 million for the quarter, down from $8.8 million in Q1 FY24. This decrease was primarily due to strong Q4 FY23 trading positively impacting Q1 FY24. Administration and corporate costs for the quarter included $1.4 million in one-off outflows associated with the cost-out program.
Net cash used in investing activities was $3.5 million for the quarter, up from $3.0 million in Q1 FY24, with $2.8 million allocated to capitalized investment in product development.
The positive revenue growth, excluding Google, and significant improvements in EBITDA indicate a strong recovery trajectory for Appen. The company's focus on generative AI projects has proven beneficial, contributing to revenue growth. However, the loss of the Google account and the ongoing efforts to achieve cash EBITDA positivity will be closely monitored by investors.
Investor Reaction:
Analysts are likely to view the revenue growth in generative AI projects positively, as it highlights Appen's ability to diversify its revenue streams. The improved EBITDA figures also suggest effective cost management. However, the loss of the Google account and the company's ongoing efforts to achieve cash EBITDA positivity may cause some caution among investors.
Conclusion:
Investors should keep an eye on Appen's progress towards achieving cash EBITDA positivity and its continued growth in the generative AI sector. The company's ability to manage costs and diversify its revenue streams will be crucial in maintaining investor confidence.