Appen (APX) Capital Raise summary

Capital Raising and Liquidity

• Announced a fully underwritten institutional placement to raise A$50 million and a non-underwritten A$5 million share purchase plan at A$1.92 per share, targeting generative AI opportunities and balance sheet flexibility.

• Placement represents approximately 11.6% of existing shares, with settlement on 16 October 2024 and trading from 17 October 2024.

• Pro-forma cash balance post-placement estimated at US$62.4 million, enhancing liquidity for working capital and growth.

• Eligible shareholders in Australia and New Zealand can apply for up to A$30,000 in new shares under the SPP, open from 18 October to 1 November 2024.

• Barrenjoey Markets Pty Limited is acting as sole lead manager and underwriter for the placement.

Financial and Trading Update

• Q3 FY24 revenue was US$54.12 million, down 12.9% year-on-year, but up 34.6% excluding Google.

• Gross margin improved to 41.2% (from 33.6% in Q3 FY23), reflecting cost management and project mix.

• Returned to underlying EBITDA profitability at US$1.01 million and underlying cash EBITDA of US$0.04 million in Q3 FY24.

• Revenue trend is positive month-on-month in Q3 FY24 (excluding Google), supported by generative AI project growth.

• China and Enterprise/Government divisions are experiencing significant revenue growth.

Project Pipeline and Working Capital Dynamics

• Generative AI projects are high volume, short duration, and can cause spikes in revenue and working capital needs.

• Crowd costs are incurred before customer receipts, increasing the need for liquidity during project bursts.

• Project mix includes steady, ongoing work and short, sharp projects of varying sizes.

• Preparedness for a range of project types is a priority.

• Additional capital will support working capital needs, especially for generative AI projects requiring upfront crowd costs.