Appen (APX) H2 2024 earnings summary

Executive summary

• Revenue excluding Google grew 16% year-over-year, driven by generative AI projects and strong performance in China.

• Generative AI-related projects accounted for 28% of H2 FY24 revenue, up from 6% in H2 FY23.

• Cost discipline led to a 26% reduction in operating expenses and a return to profitability, with underlying EBITDA of $3.5 million in FY24, a $23.9 million improvement on FY23.

• China delivered 71% year-over-year revenue growth, with major LLM model builders as key customers.

• The company responded swiftly to the Google contract termination, focusing on generative AI and cost reduction.

Financial highlights

• Total revenue decreased 14% to $234.3 million due to the Google contract termination.

• Excluding Google, revenue grew 16% year-over-year; Q4 FY24 revenue (ex-Google) was $66.7 million, up 37% from Q4 FY23.

• Gross margin increased by 3 percentage points to 39.3%, driven by a favorable project and customer mix.

• Underlying EBITDA before FX improved by $23.9 million to a $3.5 million profit.

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

Outlook and guidance

• High conviction in LLM-related growth for 2025, with positive customer feedback and ongoing experimentation in the market.

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

• Cost base expected to remain consistent, with operating leverage as growth resumes and focus on cash EBITDA positivity.