Appen (APX) H1 2024 earnings summary

Executive summary

• Revenue for H1 FY24 declined 18–18.5% year-over-year to $113.4–$113.7 million, mainly due to the Google contract termination, but excluding Google, revenue was down only 1.8–2%.

• Generative AI projects drove significant growth, contributing up to 28% of June revenue and 14.7–15% of H1 revenue, with 42 generative AI customers in H1.

• Cost reduction programs totaling $73.5 million AUD (including $13.5 million in H1 FY24) were completed, resulting in a 33% decrease in operating expenses.

• Statutory net loss after tax improved to $17.8 million from $43.3 million in H1 2023; underlying EBITDA loss improved by $13.4–15.5 million to a $2.3–2.6 million loss.

• Cash balance at June 30, 2024, was $34.7 million, up $2.6 million from December 2023, with no debt.

Financial highlights

• Group revenue: $113.4–$113.7 million, down 18–18.5% year-over-year; excluding Google, $100.0–$100.3 million, down 1.8–2%.

• Gross margin increased 0.4 percentage points to 37.7% due to favorable project and customer mix.

• Underlying EBITDA (before FX): $(2.3)–$(2.6) million, a significant improvement from $(15.7)–$(18.1) million in H1 FY23.

• Statutory diluted EPS: (8.06) cents; underlying diluted EPS: (5.37) cents.

• Operating cash inflow was $10.6–$11.4 million, up from $9.0–$9.7 million in H1 FY23.

Outlook and guidance

• Revenue momentum remains positive excluding Google, with July revenue up 26% year-over-year (excluding Google) and continued growth in LLM-related projects.

• Management targets underlying cash EBITDA positivity on a run-rate basis in early H2 FY24.

• Cautioned that monthly revenue may be volatile due to the exploratory nature of generative AI projects.

• Strategic focus includes building next-generation platforms, leveraging AI, and tightly managing costs.