Appen (APX) H2 2024 earnings summary

Executive summary

• FY24 marked a transformative year with a return to profitability and cash EBITDA, driven by 16% revenue growth excluding Google, 71% growth in China, and a 26% reduction in operating expenses.

• Generative AI projects accounted for 28% of H2 FY24 revenue, up from 6% in H2 FY23, highlighting strategic market entry.

• Swift response to the Google contract termination, cost reduction, and focus on generative AI projects drove performance.

• Strong growth in China and Global Product divisions, while Enterprise and Government divisions saw lower volumes.

Financial highlights

• Total FY24 revenue decreased 14% to $234.3 million due to the Google contract termination; excluding Google, revenue grew 16%.

• Gross margin increased 3 percentage points to 39.3% year-over-year.

• Underlying EBITDA before FX improved by $23.9 million to $3.5 million, reflecting cost reductions and revenue growth.

• Statutory net loss after tax was $20.0 million, a $98.1 million improvement year-over-year.

• Cash balance at year-end was $54.8 million, up $22.7 million from prior year.

Outlook and guidance

• High conviction in LLM-related growth for 2025, with positive customer feedback and ongoing market expansion, especially from Global and China customers.

• Expect month-on-month revenue variability due to project cycles, rapid LLM market evolution, and customer planning.

• Confident in full-year growth and ongoing focus on cost control and cash EBITDA positivity.

• Non-LLM work is expected to remain stable with no major changes anticipated.